Jamie Dlugosch

Big 3 Make Their Case--Will it Help?

by Jamie Dlugosch   11/20/08

Jamie Dlugosch takes a look at the hottest topics to keep an eye on throughout the day.

Anyone else having that odd sense of déjá vu? The market was focused on the hearings in Detroit. Hat in hand, Big 3 auto executives made their case for emergency loans. Without assistance from Washington, Armageddon would ensue. Where have heard that before?

It sure sounds like the warning bells from Lehman Brothers in the days before the Wall Street firm declared bankruptcy. At that time the free market mavens harrumphed at the idea of any interference. Damn the consequences. Let the market do what it will do. Well those consequences were significant indeed.

The entire financial sector was brought to its knees. At the end of the day, government did get involved and did so in a major way. Too little help too as stocks collapsed and have been bleeding ever since nonetheless. Now the warning bells are sounding again.

Adam Smith clones protest. Stocks drop in value. You don't have to be a genius to know what the short term will bring if Detroit goes down. As appealing and ideological as it may sound, non interference is not the right call here. Oh well, I'll save that debate for another forum.

For now, just know that the Dow was down 427 points or 5.07% yesterday. Both the Nasdaq and the S&P 500 were down more than 6%. Say hello to Dow 6,000 if any of the Big 3 file bankruptcy as threatened.

The Federal Reserve lowered its forecast of economic activity for this year and next. They also stated that lower interest rates may be needed to help fight the worst financial crisis to hit the country in 50 years.

This should be no news, but the market did seem to lose steam after release. With few bullets left to fire, the central bank is all but powerless to fight this all important battle. Not a good sign for the economy or stocks.

Microsoft (MSFT) CEO Steve Ballmer gave Yahoo (YHOO) the finger today. With many hoping MSFT would step in now that Chief Yahoo, Jerry Yang is in his proper place; Ballmer provided shareholders a cold shoulder.