There have been various developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:
- As expected, late last week Congress passed a revised financial bailout bill.
- On Monday, the Dow Jones Industrial Average dropped 369.88 points.
- On Tuesday, the Dow Jones Industrial Average dropped 508.39 points.
- On Wednesday, the Dow Jones Industrial Average dropped 189.01 points.
- On Thursday, the Dow Jones Industrial Average dropped 678.91 points.
- Top ranked market analyst Jeffrey DeGraaf, managing director at ISI Group, predicts that U.S. stocks are only “half way through” their decline.
- The Federal Reserve and other central banks across the world slashed interest rates early Wednesday.
- Congressional budget analysts reported that, during the last 15 months, the credit crisis has wiped out $2 trillion of Americans’ retirement funds.
- The National Automobile Dealers Association predicts that the credit crunch will cause 700 auto dealers to go under this year.
- The U.S. Department of Energy predicts that consumers will pay about 15% more to heat their homes this winter.
- Alcoa reported that its third quarter earnings plunged 52%.
- The International Monetary Fund said that financial institutions worldwide will suffer losses on bad loans and related securities of at least $1.4 trillion.
- Within one week after the federal government’s bailout of American International Group (“AIG”), the company spent $440,000 sending executives to a posh California resort.
- Just days after receiving an $85 billion loan from the Fed, AIG is apparently borrowing an additional $37.8 billion from the Fed. Interestingly, this is virtually the exact amount that AIG paid to investment banks out of the original $85 billion loan.
- Bank of America’s third quarter profit fell 68% and the bank announced it would cut its dividend.
- Bay announced that it was cutting 1,600 jobs
- Citigroup and Wells Fargo filed legal actions against each other over rights to acquire Wachovia. The two entered into a legal truce to see if differences can be worked out. Late in the week, Citigroup withdrew its effort to acquire Wachovia.
- Banks in the United Kingdom got an unprecedented $87 billion government bailout.
- Newsweek reports “The credit crunch goes global.”
- Bank of America sold 455 million shares at $22 per share in order to raise $10 billion. The sales price was below Bank of America’s market price.
- Retailers posted weak September sales.
- Automobile maker Volvo announced that it would lay off an additional 3,300 employees. In additional it announced it would terminate contracts with 700 consultants.
- According to Moody’s Economy.com, approximately 12 million homeowners or 16% of all homeowners, owe more on their homes than their homes are worth.
- Most economists agree that the United States is now in a recession.
- The United States is considering taking ownership stakes in many U.S. banks.
- CNN Money reports that “States and municipalities are facing their worse budget crunch in decades ? and its only going to get worse.” States and municipalities are suffering large shortfalls in tax revenues. Meanwhile, expenses are rising. Reductions in workforce appear to be one way states and municipalities will try to address the problem.
- A new study has shown that over the past decade housing expenses far outpaced income growth.
- IBM earnings for the third quarter beat expectations.
- General Motors stock fell to its lowest level in 58 years; Ford Motors fell to a 26 year low. S&P announced that both were at risk of bankruptcy.
- Investors withdrew $72 billion from U.S. stock and bond mutual funds in September.
- The State of Virginia ordered 570 state employee layoffs.
- Micron Technologies announced that it would cut 15% of its workforce or approximately 2,850 jobs. Micron, a chip-maker, cited declining customer demand and oversupply for the job cuts.
- Costco announced that its quarterly profit rose 7%.
- Eight states have unemployment rates over 7%. They are: Michigan; Rhode Island; California; Mississippi; South Carolina; Ohio; Illinois; and Nevada. Washington, DC, North Carolina and Alaska have unemployment rates of 6.9%.
- The Dow Jones Industrial Average fell to 8,579.19, its lowest level in five years. The Dow has dropped almost 40% since October 9, 2007.
- Reserve Management, which had several money market fund “break the buck” last week, announced that it is shutting down 15 more funds.
Page Perry’s Market Monitor is published periodically to give investors an overview of certain recent developments impacting the economy and/or the investment markets.