CHESSNOID

I was just reading the market news for the overseas markets.  Overall, worldwide investors are bracing for worse times and more bad news.  They sold off today and are holding on to cash to avoid further loss of principal.

Every regional benchmark fell deeply in the red.

Hong Kong’s Hang Seng Index led the region’s losses, tanking 1,272.86 points, or 7.22 percent, to 16,364.33 — its lowest level in over two years.

In Japan, the Nikkei 225 stock index was down 445.67 points, or 3.79 percent, at 11,304.12. Australia’s S&P/ASX200 index fell more than 3.5 percent, South Korea’s Kospi lost 3.6 percent and Shanghai’s index fell 5.8 percent.

The losses tracked U.S. markets, where the Dow Jones industrial average fell about 450 points, or 4.06 percent, to 10,609.66.

Investors were unsettled by the Federal Reserve’s $85 billion loan to AIG, the huge U.S. insurer that lost billions in the risky business of insuring against bond defaults. It was the latest financial giant to fall in a historic financial crisis on Wall Street that’s already claimed investment banks Lehman Brothers and Merrill Lynch.

“It’s a complete collapse of confidence,” said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. “The financial crisis in the U.S. is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe.”

I would like to say we will have a bounce like we did after Monday’s 500 point drop, but with Wednesday’s 449 point drop in the DOW the shift of momentum may continue downward. At this point, we can only guess if the bargain hunters will be out in force tomorrow, or if they will wait out another drop after being burnt twice with 4% drops in a week.

The Dow Jones industrial average, which only two days earlier had suffered its steepest drop since the days after the Sept. 11 attacks, lost another 450 points. About $700 billion in investments vanished.

One day after the Federal Reserve stepped in with an emergency loan to keep American International Group Inc., one of the world’s largest insurers, from going under, Wall Street wondered which companies might be the next to falter.

A major investor in ailing Washington Mutual Inc. removed a potential obstacle to a sale of the bank, and stock in two investment banks, Morgan Stanley and Goldman Sachs, was pummeled.

It was the fourth consecutive day of extraordinary turmoil for the American financial system, beginning with news on Sunday that another venerable investment house, Lehman Brothers, would be forced to file for bankruptcy.

The 4 percent drop Wednesday in the Dow reflected the stock market’s first chance to digest the Fed’s decision to rescue AIG with an $85 billion taxpayer loan that effectively gives it a majority stake in the company. AIG is important because it has essentially become a primary source of insurance for the entire financial industry.

As the stock market staggered, the price of gold, which rises in times of panic, spiked as much as $90.40 an ounce. Bonds, a traditional safe haven for investors, also climbed.

“The economy is not short of money. It is short of confidence,” said Sung Won Sohn, an economics professor at California State University.

The financial stocks in the Standard & Poor’s 500 dropped even more, falling 10 percent, and insurance that backs corporate debt soared for the last two surviving independent U.S. investment banks, Morgan Stanley and Goldman Sachs.

“It seems as though banks are hoarding cash, no matter what rate they could be lending it at,” said David Rosenberg, North American economist at Merrill Lynch.

I wish the new Presidential candidates would show actual leadership and explain what they will do to get this economy going. They are all just saying generic crap to pander to the voters.