It’s rare that you’ll see two seperate posts from me about a similar subject, but the bankruptcy of Lehman Brothers and the sale of Merill Lynch is too big of an issue to mention only once. If you haven’t read yesterday’s “The Plummet-fueled by Lehman Brothers and Merrill-lynch” post yet, please refer to it first.

The Dow Jones plunged over 500 points today! Everything looked fine up until the end of the day when we broke below the key range of 11,000. Just like the S&P 500, we tested the July 15th lows and broke them.

We ended Monday just under our key support level, if we open lower Tuesday morning and stay within this range 30 minutes into the trading session we should continue to plummet further. Moreover, if AIG can’t hold it together I think we could see a new bottom set in. The U.S. indices should crash to create new lows tomorrow…a rally without government intervention is not likely to happen.

As of today, the credit crunch is not just a U.S. issue but a global one. Lehman is popular over in HK, a crash in Asia is definite since most of Asia had today off. As Lehman liquidates it’s assets, the banks and brokerages will have to adjust their balance sheets accordingly. More future writedowns will come followed by even more eventual failures. Again, we can only turn this market around if the Fed bails out companies, but as election day nears the Republicans are unlikely to spend tax payor’s money on bailouts. The Consumer Price Index report tomorrow may also provide relief but remember, the CPI is a lagging indicator. I hope all of you in the States, especially those in larger institutions, have backup plans and savings to fight through these upcomgin hard times. I know you’re thinking “well how do I know if my firm is in trouble?”…a good place to start would be to look at the failing companies (LEH, BSC, WM, AIG) to see which companies hold the biggest stakes in these.

I think I’ve had enough to say about the recent news…so I’d like to take this opportunity to thank all my readers who have followed my articles since January 2008. I’d also like to make a special thanks to those who have been spreading the word about H.A.S. Without your help this blog would’ve never grown as much as it has in the past year. Just a simple “I’ve heard some good things about this blog” like 101DoFollowBlogs‘ comment keeps me motivated to write more often.

Richard
richard[at]hedgeagainstspeculation.com