The DOW’s best day in 5 1/2 years. Your money working for investor class.

(8 pm – promoted by ek hornbeck)

The Dow Jones average was up 417 points today.  You know, because the US economy is doing so well, jobs are popping up everywhere and everything financial is coming up Roses!  

OOP’s.  My bad.  Here is the real reason.  

Here is the Headline and some input from CNNMoney:

Stocks surge with the Dow soaring 417 points as investors cheer reports that the central bank is pumping an additional $200 billion into the banking system.

Stocks rallied Tuesday as investors welcomed news that the Federal Reserve will lend up to $200 billion to banks and lenders as a means of loosening up tight credit markets.

According to early tallies, the Dow Jones industrial average (INDU) jumped almost 417 points, its fourth-biggest one-day point gain ever and the biggest one-day point gain since July 2002. In percentage terms, the gain of 3.55% was the best since March 2003.

The blue-chip index had ended the previous session at a 17-month low.

The broader Standard & Poor’s 500 (SPX) index climbed 3.7% after ending the previous session at a 19-month low. It was the biggest one-day percentage gain since May 2002.

What does this mean to you, American citizen?  Well, it means that the Federal Reserve is going to have to print more money in order to bail out the companies that, not unlike a Las Vegas gambler, placed all their money on number 18 on the Roulette wheel and the wheel stopped on 24.  Close, but a loser.

The Fed will make up to $200 billion available to a group of 20 big investment firms for a term of 28 days, rather than overnight. The program is being coordinated with central banks worldwide.

http://money.cnn.com/2008/03/1…

Check this out.  The Fed thinks that liquidity pressures are the problem today.  We silly non-economists know that the problem today is that the financial corporations overextended themselves betting on sub-prime loans, but perhaps we are wrong.  NOPE!

The Fed said it will lend the money to financial institutions for a term of 28 days, rather than overnight. The action is being coordinated with central banks in other countries to try to provide help in a global credit crises that threatens to push the U.S. economy into its first recession since 2001 if it hasn’t already.

“Pressures in some of these markets have recently increased again,” the Fed said in a statement. “We all continue to work together and will take appropriate steps to address those liquidity pressures.” The other banks involved are the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank.

In addition, the Fed has authorized increases in existing programs called “swap lines” with the European Central Bank and the Swiss National Bank.

“These arrangements will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB respectively,” the Fed said, extending the term of these swap lines through Sept. 30.

Notice that other countries are now coming into play due to the screw ups here in the US lending market.  Not only is Europe getting into the game, but if you click on the link above, Canada is palying roulette with us too.

The Fed since December has been making short-term loans available to banks through a new auction facility. It has provided $160 billion available to squeezed banks in hopes it will help them to continue lending to individuals and companies.

Last week, the Fed announced that it would increase the amount of loans it plans to make available to banks this month to $100 billion. At the same time, it said it would make another $100 billion available to a broad range of financial players through a series of separate transactions.

On February 28th, this information that I have documented before in an essay here became available via CNN:

In the past year there have been four bank failures.

And the chairman of the Federal Deposit Insurance Corp and banking industry experts foresee many bank failures down the road.

“Regulators are bracing for 100-200 bank failures over the next 12-24 months,” says Jaret Seiberg, an analyst with the financial services firm, the Stanford Group.

Expected loan losses, the deteriorating housing market and the credit squeeze are blamed for the drop in bank profits.

The problem areas will be concentrated in the Rust Belt, in places like Ohio and Michigan and other states like California, Florida and Georgia.

The number of institutions categorized as “problem” institutions by the FDIC has also grown from 50 at the end of 2006 to 76 at the end of last year.

What we are being fed, by the Fed is that they want to make things better for everyone.  What they really want to do is stop the possible bank failures that are weighing down the market and the Bush administration for as long as they can.  At your expense, again, of course.

Our US Dollar is now at historic lows against the currency of other countries.  Just wait.  It will be going much lower very soon.

Our US food, energy and commodity prices are rising to historic highs.  

The combination of the devaluation of the US dollar and rising cost of living, do we really have the money available to bail out the corporations the plainly screwed up our economy to begin with?

Your call.  I know what I think.

22 comments

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    • brobin on March 11, 2008 at 11:27 pm
      Author

    but we are so screwed. Hold on to your money and pay off your debt.  Really, as quickly as possible, put every penny into paying off your debt. Put your credit cards away and learn to like dirt sandwiches.  Without bread, of course.  Wheat prices are skyrocketing.  

    Luckily, mustard is still affordable and it cuts the taste of dirt quite well.  

    • brobin on March 12, 2008 at 12:15 am
      Author

    Actually, I like wine.  Do you have to hold your nose to drink it?  Luckily I have two hands available as of today.

  1.  . . . (a combination of bargain-hunting and giddy denial) will last for three days to a week, max, like all the upticks following rate cuts this year.  Then reality will reassert itself and the Dow will plunge anew.  I expect it will below 10,000 by summer, maybe by May.

    • Pluto on March 12, 2008 at 12:37 am

    do we really have the money available to bail out the corporations…

    Actually, this money is not in the form of money — but “credits” for bank reserves, which have fallen so low that they will have to close. Including Bank of America and Citibank.

    It still ends up being accounted as money, at the end of the year (after the elections).

    And of course we don’t have the money. If we did, there wouldn’t be a deficit or national debt. And we wouldn’t be owned by the rich foreign nations who give us loans. God help us all when we default next year.

    • Viet71 on March 12, 2008 at 2:20 am

    is driven by computer programs written by guys (yes, mostly guys) who have M.D.s or PhD’s in math and physics.

    It’s both tactical and strategical.

    But the programs suffer from a three-body problem.

    They work as long as there are just sellers and buyers.

    But now there are ordinary humans, mortgage and credit-card owers, in the mix.

    Can’t write a computer program for this model.

  2. banks get a handle on their exposure to bad sub-prime loans (to convince customers they won’t go bankrupt)

    and

    oil prices pull back significantly to lower the price of gasoline.

    The market will probably shed those 417 points by the end of the week as the ramifications of $110/barrel oil prices sink in.

  3. Today:

    Dow 12,110.24 46.57 (0.38%)

    Nasdaq 2,243.87 11.89 (0.53%)

    S&P 500 1,308.77 11.88 (0.90%)

    • creeper on March 13, 2008 at 4:42 pm

    my piddly little IRA has lost five thousand dollars in two months.

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