Today was a bloodbath in all North American markets, and all indications are that foreign markets will follow overnight. How many more days of 3% selloffs can investors take before saying, "no mas!"? Lehman Brothers, Washington Mutual, AIG, and Wachovia were all down big. I doubt any of these companies survive in their current form. As I mentioned on Thursday, the current feeling is negative, but not hopeless. And as long as hoplessness eludes Wall Street, potential for a major move lower remains. My next target for the S&P 500 is 1075.
I noticed that CNBC posted their updated earnings projections for the 3rd quarter. As of Sept 5, they stood at +0.8%. I don't think there's a snowball's chance in hell that earnings are positive in Q3. Back in April, Q3 estimates were +17.3%. In July, they were +12.6%.
Kevin Depew made me look bad by summarizing nearly all of what I had to say in Misperceptions About Inflation, with about 1000 fewer words. Read his Five Things You Need To Know: What Next?.
Kenneth Rogoff had a good article published by the Guardian on the topic of central bank balance sheet deterioration. With all the lending programs they have undertaken (temporarily) to support the mortgage markets. Eventually, these temporary measures will be rescinded and those hundreds of billions in supply of troubled mortgage securities will be back on the market.