Finally, we are getting there. The stock market dropped close to 500 points yesterday to close at multi year lows. Now down 19% month to date, this is shaping up to be one of the worst months on record. Fear is in the market and sellers out number buyers by huge numbers.
But there is a silver lining. The governments around the world have pumped trillions of dollars into the system and it will began to take effect soon. The best thing that is happening though is the lack of government intervention. Since the interventions have stopped, the markets, left own their own have responded in the way they were designed to work. Citigroup, one of our big money center banks saw their shares fall below $5.00 yesterday. This prompted forced selling by mutual funds that had been hold the beleaguered companies stock when it was known over 6 months ago that the bank was in trouble. Now, the company must look to private sources for capital, a partner or bankruptcy. Again, with no intervention, the speed at which this happens is accelerated, not delayed. This is playing out with many stocks. Logically, then we are getting close to a bottom, one that cannot be reached with the government picking and choosing recipients of TARP money in a haphazard way.
Stay away from thebanks, many will fail, their deposits will then go to other banks and shore up their accounts. Let the big 3 automakers become 2 or less and the domestic production of automobiles will fall to a more profitable level.
Will there be more pain. Absolutely! But even the worst pain goes away when the correct medicine is applied.
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