I don't think it would matter much. We've stabilized some but I still think as I've said for a year that we could correct below 16,000 just based on long term charts.
probably easiest explained here:
What good would that do? Stocks have been overvalued for a long time now, and it was only a matter of time before something caused it to correct. This isn't going to go away in a couple weeks. The effects will still be here for several months. If you closed the stock market for a couple weeks, it would just go right back down again once you opened it up. I think just letting it play out is probably the best thing to do.
I think we've got some more down in the market but I wouldn't want to be the one who started pulling money out at this point.
CP is short-term debt (<270 days) that is issued by corporations and governmentals. A company will generally have a set amount of CP outstanding that is rolled over at each maturity. For example, the CP program may be $100 million. Part of this $100 million would mature at various times and amounts but must mature less than 270 days from the sale and the total outstanding would be $100 million. The company would pay the corresponding interest on the maturity and then the CP would be rolled to a for a new maturity and interest rate with still $100 million outstanding. Depending on the market, the CP rollover is going to be at a higher/lower interest rate than what just matured and the term of the maturity may be longer/shorter. In this market, people want very short-term (could be two weeks instead of two months, for example) adn they want a higher rate because they would otherwise just keep cash. A big buyer of CP is money market funds. As people withdraw money from the money market funds, there is less demand for the CP so dealers must try to remarket the paper at a higher rate. As more money is pulled from the market, rates keep going higher to try to attract investors. Nothing may have really changed about a CP issuer as far as risk but it just becomes supply and demand. You may offer 10% for something that may have been rolled over at 1% two weeks ago but investors still may not want it because they just want liquidity. The investor may need to pay their own bills, have margin calls or just want to keep cash until the markets stabilize so liquidity in the market can just dry up and the CP can't be rolled over at any rate. If you can't roll your CP, you need to pay for it with a cash or a line of credit.
At some point we'll probably see a bounce in the market that will prompt some buying and then things will slide backwards to confirm a bottom. Then I wouldn't expect a huge quick turn around. I think it's going to take a long time to dig ourselves out of this hole.
The market will reflect the economy and at this point I'm seeing a 2 year drag on the economy because of this. I highly doubt we'll reach the levels the DJIA was at for a long long time.
Looking at the long term (decades) chart for the DJIA, I think your numbers are reasonable. That's kind of what I was thinking last night anyway. I've posted on here below 1600 was possible for a year now. Recovering over the next year or more to between 2000 and 2100 is a reasonable scenario.
