Ugly on Wall Street

Anybody get the feeling that Amtrak stock will become more valuable?

 

Airlines down 33%?....hmmm....

It's a shame that 'open-skies' with Britain was no longer a given. They would certainly be takeover targets. Regardless, sound cheap if they remain solvent (could be big if for some). But would the government really let them crumble? Don't think so.

 

You think so? Maybe it will make some money w/o Federal support?

I think Americans will go back to planes. Trains are too slow. Many will realize that the terrorists cannot pull that off so easily again. I bet volume is atleast 80 % and maybe even 90% of normal within 2 years.

 

On "Meet the Press" Chaney was asked if the White House would consider lending aid to the airline industry and he responded that they would.

 

The Airline Industry has never historically been a profitable industry. With the increasing cost of energy and union problems constantly burdening them along with slow, unsteady regulation has never made them an attractive industry to invest in.

But this weakness does allow keen investors to pick up some shares of certain companies very cheap. The Federal Reserve already cut rates before the market opened and certain companies that may also recieve short-term hits, that may be very attractive are insurance companies or holders such as AIG or Berkshire Hathaway. The insurance industry has been pushing for goverment allowed and consumer accepting price increases in their industry, and the tragedy may allow them this opportunity. So though they will have a significant payout now, the increase in rates in the future coupled with the decline in stock market prices makes them especially attractive.

 

Airline stocks finished off approximately 40 %. Continental went from 40 to 20 in a day... awful.

However, I really think this is a buying opportunity for some of the other sectors. The market may have gone down as a whole because of the selling pressure, but the only things that will be affected long term imho are the airline stocks. Everything else will rebound. AMD sure looks nice at 10 bucks a share.

 

Its hard to talk about the economy now, but since the ,markets are open we should be. The economy was already teetering in terms of vital long-term indicators (productivity, debt, and trade deficits) and the events couldn't have been good for consumer spending in the short term which was masking some of our economic problems.

However, I was thinking if the Dow only took around a 6-7% hit today that would be OK, it would mean investors are not too reactionary. If the market ends the week down more than 10% that would be more troubling. The decline today was to be expected from action on other nations' market movement since the tragedy, and those other countries markets were obviously more indirectly effected than ours.

If I had money to buy/sell individual stocks, I'd be purchasing the better airlines stock early next morning (certainly Continental, maybe Alaska, SW depending on action today). (What happened to UA and AA today ??) I suspect our government will help bail them out given the situation, and I would support this move in principle (a lot of jobs and national infrastructure and consumer options are at stake). We also will have additional government spending to help rebuild NY. These potential moves may have a positive economic impact.

 

I sure hope so... I may be buying more. Considering I had bought it at about $13-$16 before and watched it go to $30. Pleeeeeeeeeeze go back up.

 

Desert Scar,

I'm afraid to get near airline stocks in the near future. For example, the latest rumor is that AA is about to cut a few jobs on Wednesday. I'd wait until the dust settles.

 

Trains are an easy target for bombs. Almost no security. I think planes would be safer, but sadly, I take the train between DC and NY all the time. I'm more nervous about the train than flying.

 

The Dow and NASDAQ are off pretty big again today. I know somebody who 1.5 years ago said the latter was going to hit 1000 once investors look at the hard data on companies productivity, I thought he was just being pessimistic but he is looking pretty on target now.

Folks I think we got some problems and the economists suggesting for a quick turn-around are dreaming more than thinking clearly.

A few things to chew on:

1) Unemployment was going up, and that was even before the airlines and affiliated travel industries layoffs are factored in.

2) #1 has to result in decreased consumer spending because more people don't have their typical incomes, or at least have to be concerned about job stability. And strong consumer spending was masking some of our more fundamental troubling economic indicators.

3) The national (federal gov) debt is huge despite making up some ground over the last few years.

4) With increased spending on the military/new home defense office, the NY package, unemployment comp, and airline bail out PLUS lack of revenue due to the tax cut and written off loses from the market, I can't see how #3 is not going up more (return to budget deficits).

5) Foreigners hold a substantial amount of our debt and may no longer like the potential return here relative to other places (as perhaps impacted by both our lowered interest rates and the weaker economic projections). This will make holding the same level of debt essentially more expensive.

6) Inflation due to #4 among other factors.

7) One recent benchmark that had been very resistant to the overall slowing economy has been home building. Well guess what, the just released stats show it has gone downward. Now we might be talking about more layoffs and further weakened spending.

Maybe some economists out there can check my logic and/or observations, but a lot of conditions seem pretty troubling overall. Now I am not going to move any of my mutual fund money around because I have 30+ years to recover, but the short term doesn't look to bright to me.

I don’t want to be chicken little here, but for the first time since the market started falling I a more believing the pessimists (we are heading for a major recession and it won’t be pretty, like the person I mentioned before told me 1.5 years ago) over the optimists (oh this is just a little blip, our economic indicators are still strong, within 18 months the Dow will hit 15000 and the NASDAQ 6000). Others thoughts???

 

Desert Scar,

Recession, we're there. The market dislikes uncertainty, and that is probably responsible for more of the drop than the fundamentals.

I think many realize that the market is getting pretty cheap, but are waiting to see how things 'shake-out' over the next few days and weeks. I.e., will terrorist attacks become commonplace?

Remember, buy low. Personally, it may not be time yet, but I'm going to buy some mutual funds. Even if they go down another 10-15%, they should be way up in only 2 or 3 years. I plan on holding them long-term anyway.

That doesn't mean that I wouldn't buy a little gold too .

 

Or short high...

Some of the bear funds have been skyrocketing the past couple of weeks. Check out Rydex and Pro Funds' bear funds.

 

How is the tax cut responsible for the "loss of revenue"? For one, a tax cut is not *spending*, and even if you think it is, it wasn't the only spending done in the most recent budget. So why would you blame it all on the tax cut?

 

Revenue is what you take in, not what you spend (expenditures). Regarding Federal revenue, that vehicle is primarily taxes. The debt has reflected the fact that historically we have had less federal revenue (taxes) than federal expenditures--we have run greater deficits than surpluses both in frequency and more importantly, total amount over time. A deficit can be created from either side (cutting taxes or increased spending), though I will admit some would argue cutting taxes actually results in increased revenue via a more prosperous general economy (essentially the base for trickle down theory). I generally do not put much wait in that theory in practice however, our debt ballooned when we tried it and we are still severely paying for those mistakes.

I just mentioned the tax cut as one of many, and not even the among the most critical, factors likely to result in a return to federal deficits. I am not "blaming" the tax cut as the principle factor for the recession we are going to be in either. That said, though Greenspan later endorsed the tax cut, he initially did not because he viewed the worst governmental policy for the economy was a return to large deficits--that further balloon our debt. The tax cut certainly isn't going to help this, and its design wasn't well thought through either (more promised tax cuts later than immediate money back into the economy). Again though, it is not the major factor, just another one certainly not helpful and perhaps slightly harmful one.