Four at Four: An Outright Disaster .
David Gaffen, November 20, 2008, 4:37 pm
The market was crushed, again. An up-and-down session ran into a brick wall late in the day when it became apparent that any bill to rescue the nation’s automakers would, at best, be delayed until December. And from there, the market corkscrewed itself into the ground, led by the financial stocks, which once again were routed. Citigroup dropped 26%; General Electric fell 11.1%.
Chris Johnson, CEO and chief investment strategist at Johnson Research Group, once again pointed to that old saw about the markets hating uncertainty, and in this case, a new element of uncertainty was introduced as a result of halting approach by Congress with regard to the automakers. There are many who would argue that these companies should, in fact, not be bailed out, but from there plenty wonder just how bad the economy will get (and expectations are already for a 4% decline in GDP for the fourth quarter).
“Any time the market has a predisposition, it seems to be jerked out from under them,” Mr. Johnson says. Still, he’s not expecting this to be the end of the selling — pointing to positive commentary on television regarding buying the market now that the Chicago Board Options Exchange’s volatility index kicked itself up over 80 again. For that vaunted capitulation to occur, “we need to see people stop trying to buy these bottoms,” he says, and for investors to realize after the fact that the cathartic selling had occurred when they, too, were selling (presumably including himself). What’s happening now, he says, is that investors are “trying to catch a falling knife.” Once investors have been shorn of their fingers, they’ll learn.
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