Bankruptcy

Markets Continue to Fall, Deflation Spreads(?)

By J. Michael McBride

Yesterday, the Dow fell 430 points to close below 8,000 for the first time since March of 2003. It has been down this morning so far some 200 points to swing back up for a loss of only 80 points or so at present. If the past is any indication, the last few minutes of trading can change the whole day’s performance since there have been huge swings in the hour (minutes) before the closing bell. The price of a barrel of crude oil is hovering around $50, down from a July high of $147.

Again, from what I read, all markets are falling including commodities and foreign markets, so look with healthy skepticism upon those who still are saying “don’t sell, ride it out” or “diversify and you will be OK.” (Unless the definition of “diversify” is both T Bills and cash.)

Next, there should continue to be some days where any given market will become grossly over-sold and then it will pop up for a day or two. But that is only a temporary pop up on the way down. Some of the largest one day gains were during the Great Depression.

Finally, what to own – T Bills, cash in safe bank ( see link http://www.thestreet.com/screener/index.html?src=ratingsindex&tab=3 for safe banks) and some inverse funds, like DOG and there are others (look at Pro Shares site for their list of specialized inverse funds which increase in value as given markets fall – here is a link to that site: http://www.proshares.com/funds ). Inverse funds trade like stocks and the only really weird thing that I have come across in trading them is as to GLD. That one is not like other ETF’s in that you actually own some gold in a vault when you own GLD, so when you sell it for a gain, the tax ramifications are different. PLEASE check with your tax advisor if you decide to get into GLD or a similar fund. (By the way, now is not the time to buy gold either – again according to what I read it has further to fall.)

Here is a link to an article on yesterday’s market:
http://www.breitbart.com/article.php?id=D94I822O0&show_article=1

Here is current information on today’s market swings:
http://money.cnn.com/data/markets/dow/

Here is a link to an article on the falling price of oil:
http://news.bbc.co.uk/2/hi/business/7739352.stm

Finally, as always, this is not legal or investment advice, I am not an investment advisor -- etc..

Michael

Full post as published by Texas Lawyer Blog on November 20, 2008 (boomark / email).