Dow Up Nearly 500

Closed up 485 or 4.7% on revived bailout hopes and a plan to increase FDIC insurance from $100K to $250K. This move will help banks struggling under the weight of withdrawals as wealthy customers run for cover.

But just be aware, in case you are wondering why the sky hasn’t collapsed, that the fallout from this crisis will be spread over months and years. The stock market has not yet truly reacted to, or priced in, the ramifications (except in financial stocks) of this meltdown (weakened consumer spending, consumer debt default, negative growth, inflation, unemployment, etc.) Never mind the still to be revealed depths of the CDO / CDS quagmire hidden on balance sheets everywhere.

I can’t predict how low the market will go, but Dow 9000 (or lower) doesn’t seem at all far fetched (in fact, I guarantee it).

And there still needs to be some kind of government backstop (in order to get credit markets open again or else someone big is going to miss a payroll soon).

So no matter what, we’re going to be eating a crap sandwich. It’s just a matter of which flavor.

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One Response to Dow Up Nearly 500

  1. jwojdylo says:

    In my opinion, this market is going to remain extremely volatile and you will see the VIX go through the roof! I would like to see some stability one way or the other, but it looks like wild swings for now.

    http://jwojdylo.wordpress.com

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