Friday, November 21, 2008

More stocks down 85% than up at all this year

Floyd Norris points out how bad the stock market is:
There are only a handful of stocks that are up this year. I just checked the Russell 3,000, which now has 2,938 stocks in it. There are more stocks in it (218) that are down more than 85 percent this year than there are stocks (179) that are up for the year.
He also provides three possible explanations for the huge decline:
There are three reasons that come to mind as possible explanations for such an overwhelming bear market.

1. The world financial system is in deep trouble, and it is integrated, so that the credit crunch is virtually universal.

2. The world recession is hitting everywhere. Even China is now worried, and with good reason, as unemployment rises.

3. In an integrated global financial system, all asset prices were pumped up by excessive leverage, and all are now falling amid urgent deleveraging. The widely feared selling by over-indebted hedge funds is part of this, but not all of it.

I think all of them help to explain what is happening.

If you believe the third one is important, and that we are not entering into Great Depression II, then that should be creating bargains for wide investors who can wait out the recovery without worrying about margin calls.
Hat tip: Tastylunch's CAPS Blog

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