CHESSNOID

The market ended on a down note today. Mostly on concerns of the credit market crunch. Technology has been doing extremely well this last 2 months with Apple, Google, and other tech stocks zooming to the sky until the last few days. No matter how they perform, even they can’t escape the overall effects of a struggling economy headed into a harsh recession.

Investors of the stock market are starting to put it together. All the housing problems we are experiencing is starting to hit home. Over 5 years of market speculation that sent the houses from$100,000 to $600,000 in that short period of time have to go through a correction. Most investors thought that this would be isolated in a small part of the economy. What many fail to realize is that money from banks and mortgage companies were taken out in form of high risk or subprime loans to fuel that housing bubble. That same cash is not being repaid back and many are defaulting on their loans and walking away from their properties. This is spilling over into basically every industry.

As the subprime loans keep resetting, more losses will mount. We haven’t reached the peak of the massive resetting of these loans. Even then, there is a 3 to 6 month lag before they go into foreclosures and back into the never ending massive real estate inventory. I don’t know how long this part of the business cycle will last, but I expect it to be longer than anyone wants it to. All 3 stock indexes I follow closed lower. For the week, the Dow dropped 4.06 percent and the S&P 500 tumbled 3.71 percent. The technology-focused Nasdaq, which often trades with more volatility, plunged 6.49 percent. Those are all substantial drops for just a week. I am guessing we are now trading into a new downward direction and will continue that way in the stock market as more financial institutions spoon feed investors bad news. According to Bloomberg:

At least nine of the world’s biggest banks and brokerages, including Citigroup Inc. and Merrill Lynch & Co., have written down a total of more than $40 billion of bad loans and securities tied to mortgages this year after foreclosures set a record and late payments on U.S. home-loans rose to the highest since 2002. Barclays Plc, Britain’s third-largest bank, today denied rumors that it may face 10 billion pounds ($21 billion) of losses.

What makes this coming recession a difficult one to measure as far as how severe it will be are high oil prices which is closing in on $100 a barrel which will be the highest in history, gold and other commodities hitting new highs, the dollar plunging to new lows. These are all connected to the war in Iraq. We are still spending literally billions of tax dollars everyday to maintain our invasion of a country that didn’t attack us which are all being funneled mostly to thieves known as The War Profiteers. This is no secret and theses people need to thrown in prison. The money being stolen from our country needs to be re-invested back into our country.