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Local financial experts react to Wall Street plunge, recovery

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Posted: Friday, May 7, 2010 12:00 am

A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.

Here's what local financial experts had to say:

Stephen Benjestorf, financial adviser, SB Planning Inc., Raymond James Financial Services:

"I've been telling clients something like this will happen. There is volatility in the market. When you look at Wall Street and people talking about Greece, you see it's just fear. There are real problems in the market, and there is fear on top of those problems.

People worry that the problems with Greece will move over to Spain and Portugal and there are talks of the collapse of euro. Who knows what will happen? It all offers another reason for the market to sell off.

The European leadership will figure out what the problem is and work at fixing it; how long that will take all depends.

Wall Street will recognize when (European leadership fixes) it and the market will bounce back. However, after the market comes back, it will go down for another reason. We have a lot of potential issues in the next 18 months; there are a lot of moving parts. It makes it interesting.

If you look back over the years, something always rattles the market and then it corrects itself. The important thing to remember in this is, Corporate America is fundamentally healthy. Even though unemployment is high, we have a low interest rate. The jobless rate will bounce back.

I'm telling all my investors we will have volatility in the market and not to panic. I tell them not to forget their long-term goals. I'm telling them to remember their overall strategy when they started investing. Hold your course and stick to your plan."

Phil Lenser, financial adviser, Edward Jones:

"What we saw today was the stock market definitely reacting to all the news that's been talked about in Europe. The big problem with Greece seems to be the big contributor.

It's interesting what happened today because we've had an 80 percent increase in the market since its low period in March 2009. The market has seen a decline of about six percent if you take into account what's happened since last Thursday. Before that, the market has gone pretty much straight up. There hadn't been a correction yet. Days like (Thursday) are to be expected.

What we need to consider, is will the lows of a country with fewer people than the population of metropolitan Los Angeles stop the progress of the largest, most powerful economy on the planet?

It will be interesting to see how the market goes for the next few days. This may be an opportunity for longer-term investors to step up and get re-engaged in the market.

Then there was the interesting phenomenon with Procter and Gamble. It's price was below the true market price, and in that brief time the markets reflected that change. There was a 20-point difference in its value. It shows that stock makes a big difference in the Dow."

John Knight, professor of finance and real estate, Eberhardt School of Business, University of the Pacific:

"The market is always a little bit speculative because people try to assess what causes it to go up or down. People will say, 'Such and such happened and therefore this happened.' It's all very speculative.

There are a number of variables that affect stock price movement, and it's very difficult to assign responsibility in the market to one or two precipitous events.

I could say, obviously, trouble with the bailout of Greece by the European Union and the riots over there and the idea that they think it will spread caused the action.

I can make up whatever. While I'm sure it had an impact, a lot of the time, behavior in market is people start selling cause they see others sell, or they buy because others are buying.

I've never subscribed to the speculation. I've always looked at the long-term trend. That should matter, not the day-to-day.

If you aren't selling today, then the market going down doesn't matter. It's a paper loss, and it's not realized until you transact."

The Associated Press contributed to this report.

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  • posted at 1:50 pm on Fri, May 7, 2010.


    Here are some words from a news article of one of his accomplishments: Rep. Richard Pombo (R-CA) was named one of the 20 most corrupt Members of Congress in "Beyond DeLay." Pombo had multiple ethical issues: accepting campaign contributions in return for legislative assistance; keeping family members on his campaign payroll; and misusing official resources. Now, AP is reporting that Pombo does have an Abramoff connection: Looks like now Jack Sieglock wants to carry on that right wing agenda.

  • posted at 1:42 pm on Fri, May 7, 2010.


    George W Bush and his crackdown on corporate and Wall Street corruption sure worked great, didn't it?

  • posted at 6:46 am on Fri, May 7, 2010.


    Nobody, NOBODY will convince me that this was not a planned, engineered event...like in the movie "Wall Street". I firmly believe some huge players did this to reposition their holdings. I don't trust the "market' 1 single iota. The whole thing is a rigged casino. Alternatives? Banks will cheerfully rent your life savings for practically free, then turn around and charge exorbitant interest to their "customers". Its a sad state affairs for we average investors. So much for those that trumpet the benefits of unregulated "free markets", eh?

  • posted at 6:39 am on Fri, May 7, 2010.


    Hmmm....the more I hear about this, the sketchier it gets. The words, "insider trading" "massive shakeout" "market manipulation" all come to mind...especially when I hear that this giant Ooops! was possibly precipitated by Citigroup. Hmmm....didn't they get a great big bailout by Jr. Bush? They sure did!http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112400And it looks like I'm not the only one thinking possible market manipulation.http://willyloman.wordpress.com/2010/05/07/was-yesterdays-glitch-really-big-banking-blackmail/#comment-16447



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