A slowdown in economy was known for some time without market panic. The sudden change in market may seem to be a surprise superficially. But market makers may have been planning since the end of June. The outcome of the expiration of Federal Reserve bond buying program did not result in investors selling. Market makers even attempt to prop up market on momentum buying twice. When the debt ceiling issue was resolved, market should settle down. But instead market makers use cash on hand to create panic with heavy selling. Market participants ran under herding behaviour. Again market makers made profit on market sell-off. The difference is a steep drop this time rather than a slow decline across several weeks last time. But in both case, market makers made significant profit.
This is an example of the "Butterfly Effect".
Market makers and day traders have been using news to create panic selling. Therefore profit should be realized within short time when the panic is stabilized. Since market markers and day traders bet with short positions and derivative products, the former have to be recovered soon while the latter can be held longer until expiration. Individual investors are using sideline cash to speculate and can also wait for market stabilization.
Market makers have taken the market by surprise last week. The economic condition should support the equity stock market to recover from panic selling. Also long term investors may find opportunities at this level.
The speculative trading portfolio does not anticipate that market makers would have enough confidence to short sell the market. Knowing in advance the S&P downgrade of US debt may have given market markers the confidence to create panic selling.
It is guessed that market makers should have finished with this round. Many investors are shocked by the fast drop and wild swing and remain standstill to watch the market. See if investors can recover some loss in the coming week.
Life in the Fast Lane: Ferrari Sales Surge in U.S.
Amid a generally blah spring for car sales, Ferrari just turned its best half year in history, with revenues up nearly 20 percent from the year before.
If the rich have done well in the past few years, the extremely rich have done extremely well. Ferrari North America President Marco Mattiacci notes that the number of high net-worth individuals grew last year and is back to the level of 2007. "What has changed is that people now want to spend, they want to enjoy life," he says.
But as with luxury brands, Ferrari may find that the greatest prospects for growth lie in China. Sales in China more than doubled in the first half of 2011.
The Slow Growth Economy Will Last For Years, Says Professor Lerrick
Because, Professor Lerrick says, the United States does not have an economic policy--and has not had one since Ronald Reagan was President. Instead, the United States has a social policy, one in which the government's goal appears to be to spread the wealth earned by the richest Americans to the rest of the country without promoting private-sector growth in the meantime.
U.S. Economy Running at ‘Stall Speed’
“We’re not looking at a recession yet, but we’re at a tipping point,” Gross said yesterday in an interview on Bloomberg Television. “We’re at what we call a stall speed in which corporate profits don’t grow, jobs aren’t created,” said Gross, who is based in Newport Beach, California.
The U.S. economy is “very close to stall speed” and the Fed may need to consider signaling a longer commitment to low interest rates, according to BlackRock’s Fisher, who is based in New York.
Two-year Treasury yield drops to a record low
Treasury prices are jumping, sending the yield on the two-year note to a record low, as investors buy U.S. government debt in search of safety.
The yield on the two-year Treasury note fell to 0.29 percent from 0.34 percent late Wednesday. Earlier in Thursday trading, the two-year yield fell as low as 0.265 percent, an all-time low.
QE3 Is Coming, But Won’t Save the Economy: Lance Roberts
Stock indexes continue to tumble Thursday, with the S&P 500, the Dow and the Nasdaq falling more than 2 percent.
Roberts is of the mind that the Fed will step in to help stave off another recession, but the potential for it to work after QE1 and QE2 is not great due to the law of diminishing returns.
To top that off, he says markets, not consumers, will feel all the benefits if QE3 should come to pass. Consumers will actually take a beating because commodity prices -- oil and food prices -- will jump as the Fed pumps more dollars into the economy.
Gold Rises to Record on Haven Demand Amid Equity Slump, Currency Turmoil
Gold futures rose to a record $1,684.70 an ounce as turmoil in financial markets boosted demand for the precious metal as an investment haven.
“The geopolitical backdrop is inherently bullish for gold,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “As risk appetite wanes, people have been piling into gold and Treasuries. Yields are so low that the only alternative is gold.”
The Federal Reserve has completed two rounds of so-called quantitative easing and kept its benchmark interest rate at zero percent to 0.25 percent to bolster the economy.
Fear on the Street: Inside the Stock Sell-Off
Stocks posted a severe drop today, with the Dow Jones Industrial Average falling 4.3% and the Nasdaq crumbling over 5%.
By the end of the day there were few places left to hide. Gold, silver, crude and yields on Treasuries all fell sharply as traders looked for safety and were met by nothing but falling prices.
Corporate America is sitting on record amounts of cash but is refusing to make new investments with so little end demand for its products. Consumers and corporations are hoarding cash, and the economy appears to be seizing.
Today was the first sign of fear stocks have seen in a year. To paraphrase Churchill, that may not be the beginning of the end of the selling, but it's the end of the beginning. It's extremely unlikely we're going to see good economic news anytime soon.
Take hope for a quick economic recovery out of the equation and ask yourself this: If you woke up tomorrow and stocks were set to open down another 1,000 points on the Dow, would you buy or sell? Whatever your answer is, you'd be well served to consider doing it a little bit at a time now.
Trying to "call the bottom" by going all in at once is a fool's game. Be patient, be calm and tune out the panic. In a market this volatile, prudence is the only rational strategy available.
Wall Street plunge could worsen economy's troubles
The two-week plunge in stock prices is signaling economic anxiety, but it's also compounding the problem: Lower stock prices are shrinking Americans' wealth, rattling their confidence and making them less inclined to spend.
And employers may become even slower to hire.
Luxury retailers like Tiffany & Co. and Saks Fifth Avenue have remained a bastion of strength. They benefited from a stock rally that started a year ago and made wealthy households even wealthier and willing to spend. MasterCard Advisors SpendingPulse says its index of luxury sales at restaurants, food boutiques, department stores and clothiers, surged 12 percent last month.
Traders are losing faith in the creditworthiness of debt issued by a growing number of countries and in the banks that hold it. That's causing banks to charge each other more money for overnight borrowing. It's also making short-term credit harder to get, traders say.
One sign of jitters: The yield on the one-month Treasury bill fell into negative territory on Thursday. That meant that lenders would, in effect, pay the U.S. government to hold their cash. Market participants said the falling Treasury yields show that investors still regard U.S. debt as the safest place for their money.
The Government Can’t Save the Market This Time
For anyone who followed the market crashes of 2000-2002 and 2007-2009--especially the crash of 2007-2009--the 512-point drop in the Dow feels awfully familiar.
And as those market crashes reminded us, the downdrafts can last a lot longer and be a lot more severe than most people initially think. (They can also reverse themselves quickly and unexpectedly, and maybe that's what will happen this time. We can always pray.)
Investors looking for answers after wild week
A nerve-wracking week punctuated by the biggest stock market plunge in three years has left investors with more questions than answers -- and considerably less money in their portfolios.
Here's some guidance to help sort out all the mixed messages:
1. Don't panic
The volatility is dramatic and the TV anchors used phrases like "bloodbath on Wall Street." Yet despite the eyebrow raising market statistics, it's important for investors to keep a level head. Don't lose sight of your investing goals -- a key component of which is considering your time horizon.
2. Stocks on sale?
Historically the stock market is the best means to ensure that your savings outpace the rise of inflation -- though that's been minimal in recent years.
Despite the market downturn, corporate earnings are healthier and better able to endure an economic slump than they were three years ago. Earnings for the second quarter are still on pace to post a record high.
3. Play defense
When the economy gets tough investors typically flock to large companies with strong balance sheets. That's because these companies have the reserves and track record of being able to ride out economic downturns. Investors are drawn to the stability of their reliable earnings.
4. Bonds Overbought.
Investors have continued to pour into U.S. Treasury bonds for safety even though they have lost considerable allure as an investment. Heavy demand pushed the yield on the 10-year Treasury note to 2.42 percent Friday, its lowest of the year.
5. Mixed international outlook
Fund managers still advise keeping a portion of your portfolio in international investments. But the worsening debt drama in Europe makes it worth checking your holdings to make sure you're not over-reliant on companies in developed countries. Emerging markets have delivered impressive gains for international investors for years and promise to continue to do so over the long term. They too, however, have had their issues lately.
6. Shelter money in cash?
Shifting a portion of your money to cash or low-risk investments like money-market mutual funds can ease a potential hit from the stock market.
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