There's still cause for concern, but the market gained back today more than half of yesterday's losses, so if your hair was on fire, you can douse it for the time being. It turns out we aren't wiped out, yet. From the New York Times:
Stocks staged a broad recovery on Tuesday after Monday’s big sell-off. The Dow Jones industrials gained 485.21 points, halving the 777-point decline on Monday.
But the health of the economy and the global financial system was by no means assured.
Strains worsened overnight in the credit markets, the plumbing of the economy that many businesses rely on to finance routine expenses like utilities and payroll. Banks sharply increased their lending rates on short-term loans, sending Libor, a globally watched benchmark rate, to its highest level ever.
“The money markets have completely broken down, with no trading taking place at all,” said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. “There is no market any more. Central banks are the only providers of cash to the market; no one else is lending.”
So it's still bad, but not melted down.
Do I smell a rat?
Big selloff yesterday, a lot of buying today. Buying low. So somebody's going to make a lot of money. Not me though; how about you?
We'll see how this shakes out, but I wonder how many small investors unloaded their securities at a discount in the past couple of days. My guess is quite a few. And I wonder how many of them got back in the market today. My guess is not many.
There must have been a lot of big investors unloading yesterday too, but as Dave Letterman likes to say, "This smells funny."
What do I know? Zip. Probably just a coincidence.
There seems to be a symbiotic dance going on between the House and the Market. Now that the market is (maybe) coming back, how will the House react?
Hopefully, from my point of view, they don't relax. The credit crisis is still very real, and I personally hope something is done to mitigate the damage. And let's not call that something a "bailout" unless it's really a bailout. That's inflammatory. Now that our hair is momentarily not on fire, let's let cooler heads prevail.