Market Plunges in Response to House Rejection of Bailout Plan
The ABC News digital sign in Times Square announces the stock market plunge September 29, 2008 at Times Square in New York City. The market took a plunge after announcements that the House did not pass the $700 billion proposed bailout. (Photo by Rick Gershon/Getty Images North America) Let's do a little exercise.
- Take out a piece of paper and a pen.
- Now draw a wiggly line from the upper left to the lower right.
Congratulations, you've just graphed today's stock market.
Every measure of market health and stability came crashing down today following the House of Representatives' rejection of President Bush's $700 billion financial bailout plan. Reading the measures of losses is like reading the Wall Street obituaries.
Dow: Down 6.98 percent
Nasdaq: Down 9.14 percent
S&P 500: Down 8.81 percent
The Wall Street Journal's list of biggest percentage decliners is a fun read. The bodies lying on the floor of the New York Stock Exchange are mostly those of financial institutions with Wachovia leading the list at $1.84 a share, down nearly 82 percent following its purchase by Citibank.
But tech companies aren't safe either. Apple is down $22 a share to $105 and Google is down $50 a share to $381.Basically the entire market is in decline. But many financial analysts are advising people not to pull out of the market. They might have a vested interest in delivering that simple advice, but the logic isn't totally crazy. Don Hodges, chairman of Hodges Capital Management in Dallas explained it to the AP:
"In this kind of a market, it just is very normal and natural for people to become very short-term focused. Just the opposite of that happens when markets are good and going up."
Hodges, who has been in the financial business for 48 years, encourages investors to adopt a broader view and not dump good investments in a panic.
"I've had three or four clients that have sold perfectly good stocks," he said. "They're uncomfortable seeing a large percentage of their assets going down with the market like this."
If you're skeptical of the wait-it-out strategy, then you'll probably be very skeptical of the buy-it-now! strategy. If your fundamental market strategy is to buy low and sell high, logic dictates that there's no time to buy like a crash.Don't believe me? Well believe Warren Buffett. The richest man in the universe led by example when he dropped $5 billion on Goldman Sachs after the firm took substantial losses, dropping to nearly half of its cost this time last year and bottoming out at $113.
Basically the idea is this: The market sucks. But just like The Spinners said "Ooooh child. Things will be better."
But probably not until congress agrees on some kind of bailout plan.
Do you think this is a good time to buy stock? Vote here.
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