Why the Dow Jumped 497 Points on Monday

The Dow Jones average took a leap that hasn't been seen in quite some time. Wall Street literally got high, on the news of the Treasury secretary's plan to buy up bad bank assets. Here are excerpts from the CNN Money article about the Dow increase:

NEW YORK (CNNMoney.com) -- Stocks surged Monday, recharging the rally, after Treasury's plan to buy up billions in bad bank assets and a better-than-expected existing home sales report raised hopes that the economy is stabilizing.

The Dow Jones industrial average (INDU) gained 497 points, seeing its biggest one-day point gain since Nov. 21. The gain was equivalent to 6.8%, which was the biggest one-day percentage gain since Oct. 28.

The S&P 500 (SPX) index rose 54 points, its best one-day point gain since Nov. 13. The percentage gain of 7.1% was the best since Oct. 28.

The Nasdaq composite (COMP) added 99 points or 6.8% for the best one-day point and percentage gain since Oct. 28.

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plez sez: consumer confidence is still in the crapper, but it is a good sign when wall street can begin to see light at the end of the tunnel. with the Obama administration's plan to buy close to $1 trillion in bad bank assets and housing starts up for the first time in close to a year, there are hopes that a recovery is in the offing.

unfortunately, wall street will reap the rewards of a recovery long before main street begins to feel it.

in other good news, it appears that a majority (15 of the 20 top executives) of the bonus money will be returned to a.i.g. coffers... the outstanding bonus money went to overseas executives.

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Read the CNN Money article about how the Dow jumped almost 500 points on Monday.

Read the CNN.com article about how congressional Republicans don't like Tim Geithner's plan to buy up toxic assets from banks.

Read the CNN.com article about David Gergen's take on Geithner's plan for the banks.

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Obama Moves to Stop AIG Bonuses

CNN.com reports that President Barack Obama is outraged by the $163 million in bonus money that is earmarked for distribution to AIG executives as bonus money:

WASHINGTON (CNN) -- President Obama said Monday he will attempt to block bonuses to executives at ailing insurance giant AIG, payments he described as an "outrage."

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama told politicians and reporters in the Roosevelt Room of the White House, where he and Treasury Secretary Tim Geithner were unveiling a package to aid the nation's small businesses.

The president expressed dismay and anger over the bonuses to executives at AIG, which has received $173 billion in U.S. government bailouts over the past six months.

"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?"

Obama was referring to the bonuses paid to traders in AIG's financial products division, the tiny group of people who crafted complicated deals that wound up shaking the world's economic foundations.

The president said he has asked Geithner to "pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

Obama spared AIG's new CEO, Edward Liddy, from criticism, saying he got the job "after the contracts that led to these bonuses were agreed to last year."

But he said the impropriety of the bonuses goes beyond economics. "It's about our fundamental values," he said.

"All across the country, there are people who are working hard and meeting their responsibilities every single day, without the benefit of government bailouts or multimillion-dollar bonuses. You've got a bunch of small-business people here who are struggling just to keep their credit line open," Obama said.

"And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic that we have to demand."

Obama said he would work with Congress to change the laws so that such a situation cannot happen again.

Then, coughing, he added in jest, "I'm choked up with anger here."

Under pressure from the Treasury, AIG scaled back the bonus plans and pledged to reduce 2009 bonuses -- or "retention payments" -- by at least 30 percent. That has did little to temper outrage over the initial plan, however.

Obama received support from fellow Democrats, including Sen. Christopher Dodd, chairman of the Committee on Banking, Housing and Urban Affairs. "This is another outrageous example of executives -- including those whose decisions were responsible for the problems that caused AIG's collapse -- enriching themselves at the expense of taxpayers," the Democrat from Connecticut said.

He noted in a written statement that executives at other companies that received bailout funds have volunteered to forgo bonuses. "There's no reason why those at AIG shouldn't do the same," he said.

Later, Dodd told CNN he is considering an unusual approach to get the bonus money back.

"One idea we're kind of thinking about is a tax provision," the Connecticut Democrat said. "We have a right to tax. You could write a tax provision that's narrowly crafted only to the people receiving bonuses. That's a way maybe to deal with it."

Dodd said the notion is in the "earliest of thinking" and has not been settled on as a way to resolve the issue that has set off outrage in Washington and across the country.

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plez sez: while taking taking taxpayer money with one hand, these guys are enriching their pockets with the other... this type of behavior is reprehensible.

if AIG is in such horrible shape financially, then how in the heck is anyone there eligible for a bonus? every bonus plan i have been involved with has been tied to individual and company performance. the company performance obviously trumps any individual gains by $173 billion!!!

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Read the New York Times article about how Obama tells Geithner to go after AIG bonuses.

Read the Washington Post article about how President Obama is pissed off about the AIG bonuses.

Read the CNN.com article about Obama's outrage about AIG bonuses.

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Dow Down to 12 Year Lows

The Dow slipped to near 7,100 points... it hasn't been this low since mid-1997!

Excerpts from CNN Money story:

The Dow and S&P 500 tumbled to levels not seen in nearly 12 years Monday, as investors continue to worry that the government's efforts to slow the recession won't be sufficient.

The Dow Jones industrial average (INDU) lost 250 points, or 3.4%, ending at the lowest point since May 7, 1997.

The S&P 500 (SPX) index lost 26 points, or 3.5%, ending at the lowest point since April 11, 1997.

The Nasdaq composite (COMP) lost 53 points, or 3.7%. The tech-fueled index has held up better than the rest of the market so far this year, closing at the lowest points since Nov. 20, 2008.

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plez sez: the remnants of my 401(k) are just that: remnants. my wife's 401(k) losses were in the 5-digit range... yeah, that bad!

i can't even imagine what has happened with people who are on fixed incomes or living off of 401(k) money that loses value by the hour.

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Read the New York Times article about the shrinking Dow.

Read the CNN Money article about how all markets continue to lose value.

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Pfizer To Acquire Wyeth in $68 Billion Blockbuster Deal

Negotiations continued into Sunday night, with an anticipated announcement on Monday that Pfizer, the world’s largest drug maker of products like Lipitor and Viagra, agreed in principle to acquire a rival, Wyeth, for $68 billion. The deal would create the largest pharmaceutical company in the world and it would be the first big acquisition that is not a desperate merger of two banks orchestrated by the government in over six months. It would be the biggest merger in three years, since AT&T acquired BellSouth.

Five banks have agreed to lend Pfizer more than $25 billion to pay for the deal, four of which received bailout money: Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America. In addition, Barclays, which acquired Lehman Brothers out of bankruptcy in the fall, is also providing financing. Pfizer, which has $26 billion in cash and equivalents, would finance the remainder through a combination of cash and stock.

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plez sez: have you tried to get a loan in the last four months? will your bank lend you $680,000, $68,000, or even $680?!?

this acquisition - which sickens plezWorld - that the bailout was a remnant of reaganomics... that failed trickle down economics b.s.! pfizer will fire sales reps and feather their bottom-line until they shore up their drug pipeline and their fat cat CEO will continue to smell like a rose... and the wyeth CEO will get the most golden of parachutes!

there is a joke in this deal about viagra and pfizer having a hard-on for wyeth for more than four hours, but this is no laughing matter! i'm going to have to go have a long hard look at Obama's stimulus package to see if it is something that plezWorld can continue to support... where you at, RawDawg?

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Read the New York Times article about Pfizer acquisition of Wyeth.

Read the CNN Money article about Pfizer's $68 billion deal for Wyeth.

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Limbaugh on Obama: "I hope he fails"

Speaking on the policies and tactics that President Barack Obama plans to use as he attempts to set this country on the right track -- on the day of his inauguration -- Rush Limbaugh hopes that Obama fails!

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plez sez: rush must still be popping those pain pills. he blathers on like a complete idiot, completely oblivious to the mess that de-regulation and a lax bush administration has done to the world economy.

limbaugh (and his "right wing wacko" thought process) is a cancer upon this land... he should be cut away and left to rot in a trash heap! if you are still listening to this *ISH* on daily basis, i implore you to turn your radio OFF!

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Peter Schiff Predicted This Recession in 2006

In an August 2006 interview Peter Schiff generated much controversy when he repeated his long-held investment thesis: "The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship ...I see a real financial crisis coming for the United States."

On May 16, 2006 in debate on Fox News, Schiff accurately forecast that the U.S. housing market was a bubble that would soon burst. On December 13, 2007 in a Bloomberg interview on the show Open Exchange, Schiff further added that he felt that the crisis would extend to the credit card lending industry.

Following this observation, it was soon reported on December 23, 2007 by the Associated Press that "The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP... At the same time, defaults -- when lenders essentially give up hope of ever being repaid and write off the debt -- rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission."

Peter Schiff in 2006 & 2007:

plez sez: peter schiff was on it:

• he called mortgage crisis and meltdown of the subprime market
  
• he called the massive debt and credit crunch
  
• he called the recession will last several years
  
• he called the fundamentals of the economy are not sound
  
• he called the collapse of merril lynch and goldman sachs and jp morgan

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Read the Forbes.com article about Peter Schiff.

Read the Seeking Alpha article about Peter Schiff.

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It's Official... US Recession Since Dec 2007

The evidence of a recession has been widespread for months: slower production, stagnant wages and hundreds of thousands of lost jobs. Even plezWorld was downsized earlier this year.

The National Bureau of Economic Research (NBER) said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy. The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures. The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began last year.

The recession announcement came on a day when the American stock market fell nearly 9 percent in a single session. The Dow Jones industrial average dropped 679.95 points (the fourth worst drop in history) or 7.7 percent. There have only been three days in market history with bigger point losses for the Dow - the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year. Investors have long assumed that the country was in recession, and analysts said that after last week’s gains, including the biggest five-day rally in decades, a sell-off was to be expected.

Still, Monday’s losses were striking, and they reminded investors that nothing can be predicted in today’s environment. The major indexes fell by hundreds of points from the start, led by huge declines in shares of financial firms. Citigroup, Merrill Lynch and Morgan Stanley shares all dropped nearly 20 percent. Most other major Wall Street banks were also in double-digit percentage declines. The broader Standard & Poor’s 500-stock index was down 8.9 percent, and the Nasdaq fell 8.95 percent. The S.&P. and the Dow are back to their levels of last Monday, erasing nearly four days of gains. Crude oil futures for January delivery settled Monday at $49.34 barrel, down $5.09. in New York trading.

The country entered a recession exactly one year ago, at least according to the Business Cycle Dating Committee, which is made up of seven prominent economists, most from the academic sector. The group made their official announcement on Monday that the economy entered a recession in December 2007.

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators,” the members said in a statement. “A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

This is the first official recession since 2001, when the economy suffered after the bursting of the technology bubble. The period of expansion lasted 73 months, from November 2001 to December 2007. The manufacturing industry suffered its worst month since 1982, according to a closely watched index published by the private Institution for Supply Management. The index fell to 36.2 in November from 38.9 in October, on a scale where readings below 50 indicate contraction. That was the worst monthly reading since 1982, and a sign that the worldwide credit crisis was taking a serious toll on American businesses. New orders fell sharply, although export orders held steady from October.

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plez sez: i didn't need the NBER to tell me that the US is in a recession... i can look at my bank account and whimpering 401(k) to tell me that!

but to hear that we've been wallowing in a recession for over a year before they "announced" it pure bull! based on some past recessions that lasted less than 11 months, we would already be in the recovery phase. but i get the strange feeling that this one is going to cut alittle deeper and last longer than 11 months. there have been no reduction in the number of monthly job losses, the credit crunch hasn't eased, homes are still going into foreclosure, crude oil prices (along with the dow average) are crashing... and the wall street bailout hasn't trickled down to main street, yet.

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Read the New York Times article about the dow being down on recession news.

Read the Forbes article about the big dow drop on monday.

Read the CNN Money article about how the dow plunged 680 points.

Read the CNN Money article about the recession news.

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Wall Street Bailout Agreement Reached?

Like Moses descending from Mount Sinai with the stone tablets that would lay down the law to save humanity, House Speaker Nancy Pelosi announced that Congressional leaders and the Bush administration had reached a tentative agreement on a bailout of those financial markets that are on the brink of collapse.

CNN.com reports that the House could vote on it on Sunday and the Senate on Monday. House Speaker Nancy Pelosi announced the accord just after midnight Saturday and said it still has to be put on paper.

Treasury Secretary Henry Paulson talked of finalizing the deal but added: "I think we're there."

The aim of the deal is to prevent credit from drying up and causing a meltdown of the U.S. economy.

Read the New York Times article about the tentative bailout agreement here.

Read the CNN.com article about Congressional bailout agreement here and here.

Read the Atlanta Journal-Constitution article about the tentative bailout agreement here.

plez sez: in their haste to respond the clarion call by president bush, it seems that the congress has forgotten that all of us are going to have to pay for this bailout... it would be nice for the citizens of the us to have an opportunity to review and critique this "agreement" BEFORE it is voted on by the house.

a few days ago, i expressed some concerns (here) about this bailout package. methinks that plezWorld needs to give his congressman a call on sunday... i strongly urge you to call yours.