The media has erupted in recent days with commentary about this hot-button question:
Do government bailouts create more harm than good?
To which the leading voices of Wall Street reply: “Letting these banks fail would have created havoc in the world’s financial system.” (DJ MarketWatch)
What, pray tell, is THIS if not “havoc”? Federal bailouts and guarantees in 2007-8 have climbed to nearly $1 trillion. The Treasury has sent "tax rebate" checks to most U.S. households. The Federal Reserve's rate-cutting campaign lowered its target rate from 5.25% down to 2.00%. Yet... the dominoes keep falling.
Which leads us to the stock market -- the Dow Jones Industrial Average is down some 800 points over the past three days (Sept. 15-17). Monday alone was its sixth steepest drop EVER, at 504 points.
For many, it's as if the Etch-A-Sketch image of a bull was shaken clean and in its place, a line drawing of a bear appeared -- and so it’s impossible NOT to wonder how low the Dow is gonna go.
Simple. Look no further than the analysts who saw the trend coming beforehand: our Short Term Update service. In the September 12 STU, our analysts set the stage for a sharp fall and wrote: “There are no signs that an intense desire to buy stocks exists. Keep your eyes on the ball: The trend is down and that is the direction the market will take.”
But there’s a much bigger story here, one that the mainstream experts are only just now waking up to: The 20%-plus decline in the DJIA that began on October 11, 2007 is part of an across-the-board reversal that has threatened every major pillar of the U.S. economy.
The “reshaping” of Wall Street, Main Street, your street and my street has been underway for quite some time. The trick was, seeing the transformation BEFORE it began, a feat which our team of expert analysts accomplished via the following insights:
January 2007 Elliott Wave Financial Forecast: “2007: The Year of the Financial Flameout… Financial firms thrived through the rebound of 2002-6 by pushing clients, and increasingly their own capital into riskier investments. Of course, the financial industry’s position so close to the center of the mania can only mean one thing: it is only a matter of time before it joins tech stocks, real estate, and commodities in the great turn lower.”
May 2007 Elliott Wave Financial Forecast: Observed a subtle inability of investment bank profits to surpass their February peak and wrote: “This is a critical divergence that should eventually be followed by a massive reversal of Wall Streets fortunes.”
October 2007 Elliott Wave Financial Forecast: “Despite the renewed enthusiasm of investors, there remain many subtle signs that the market is losing steam.”
October 9 Short Term Update stepped up the urgency our analysis with this message: “Odds have increased that a market high is in place. The structure, coupled with turns in the other markets, suggests a top is in place. The potential, at the least, is four a large sell off.”
January 2008 Elliott Wave Financial Forecast: Special Section revealed: “2008: The Year Everything Changes.”
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