03 Oct 2008 The Snowball

We began the third quarter with most of the major stock markets in bear market posture, off 20% or more and we continued to decline from there. The Dow Jones Industrials dropped another 4.4% while both the S&P 500 and the Nasdaq fell over 9% more. From top to bottom the Dow lost a maximum of 27% while the S&P and Nasdaq toppled 30%.  It was a quarter of ugly new records as the largest bank in US history failed and the largest US insurance company appealed for government help. Every investment bank on Wall Street is now gone. The nation’s first money market fund the Reserve Primary Fund went below a dollar a share or “broke the buck” when Lehman defaulted on a large chunk of debt owned by the fund. The rates banks charge each other on loans reached record highs bringing those markets to a standstill. In fact, it’s hard to find a market that has not been significantly affected by near and complete freezes in credit flows. And broken record or all broken records, by the end of a three-month ordeal Wall Street finds itself begging for help from a less-than-sympathetic US House of Representatives.