Wall Street Crisis Sends Investors Looking For Safe Options

Three straight days packed with financial news and worry -- including the repercussions of meltdowns at major financial institutions -- have panicked investors and sent them looking for safer ground.

Morgan Stanley and Goldman Sachs, the two remaining titanic investment banks, no longer look as secure as they once did, largely because of the Wall Street panic rather than because of their own performance, the New York Times reports. Morgan Stanley is now said to be seeking preemptive action to avoid a familiar gruesome end:

Only a day earlier, Morgan Stanley defended itself from growing doubts about its future, issuing a fairly positive earnings report to ward off concerns about its health. But the fear that gripped markets after Lehman Brothers failed also enveloped the firm.

Seeking to avoid the kind of fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley's chief executive, made an unsuccessful effort on Tuesday evening to persuade Citigroup's chief executive, Vikram S. Pandit, to enter into a combination, according to people briefed on the talks.

As many stocks are sold off, sending the Dow plunging, Forbes reported that the fear on Wall Street was so great that investors bought up government bonds, traditionally very safe, at breakneck speed:

Traders were so desperate to move money into safer investments that at one point the frenzied buying of U.S. government debt sent the yield on the one-month Treasury bill below zero. By the time the closing bell rang on Wall Street the bill's yield was back up to 0.75%. Yields on longer maturities fell sharply with investors bidding prices higher. The 10-year note was offering 3.38%, down from 3.49% Tuesday, while the two-year note yield fell to 1.63%, from 1.91%.

Gold, too. It jumped more than 10 percent:

"I don't know that we've ever seen a move to the upside on this magnitude in gold history," Jonathan Kleisner, of Rex Capital Group, said on CNBC. "You could certainly draw a straight line from this market markets issue to the monetized, tangible safety of that gold metal."

Kleisner said gold has always been the "safe haven of last resort" for investors stung by stocks.

Comments

[LRM216]

I don't think one man, whether it's Obama or McCain, can "get us out of this." No matter who wins, we must all band together as a people and make the "big guys" - all of them, democrats and republicans, lay out viable plans to help put this country back into shape financially. All of the politicians and CEO's of the large companies have blood on their hands. All the fat cats lined their pockets while we all lost precious time trying to get our heads out of the sand they spread around us.

[princessofnowt]

I just love what they are cooking up now.

When it's 'just' a mortgage crisis and everybody was losing their houses, we are 'a bunch of whiners' and don't deserve to be bailed out. But when the corporations start to fall because of what was at least negligence but more probably fraud-- those in charge jump.

this trickle down thing will mean rain on our heads, as the nation goes homeless.

is everyone just going to sit there and watch this happen?

what will happen when the millions who are in denial, who don't want to think about how bad it really is, what will happen when they wake up to find they too, are homeless, jobless and forced into a life they never bargained for?

[Luca]

Well, the US has managed to create a dollar that is not yet exactly the value of the Mexican peso. But I do believe that pretty soon the whole world will be referring to the US currency as the Busho. What crooks that administration and its cronies have been...and still are. Yes, they have practiced capitalistic cronyism..­.and continue to loot the treasury. Yep, the Busho has arrived.

[Triangle1]

The market is rebounding and recovering as other people dive in and snatch up good deals. Once this panic is removed from the air, those nervous independents who couldn't decide which candidate was the lesser of two evils will probably swing back to McCain. It's up to the Democrats to make sure the economy does not recover too quickly, that more soldiers are killed in Iraq and gas prices continue going up. If there is any good news found, it's bad news for Obama. http://mespace.wordpress.com

[Egalitare]

There were lots of "smart people" who thought they were getting in on the ground floor after the initial big downturn in '29. The bought up what looked like bargins as fast as they could.

They started jumping off buildings just before Thanksgiving.

[CaptainStormfield]

You really dont get it do you. The US Economy has been hollowed out by the Bushies.
Financials too. The is the final act. Hope you like the Grapes of Wrath.

[LRM216]

It's so naive of you to assume this is all from the "Bushies." Many, many hands, for a very long time, have played a part in getting us to where we now are.

[kellygrrrl]

so Little W and Paulson think they can go to Kinkos and print up some new money
buy off the debt of all banks - give them a fresh start
POOF! problem solved

meanwhile, that $20 you just got from the ATM machine is now worth $8

[jackinhack]

TO ALL PANHANDLERS AND HOMELESS LIVING UNDER BRIDGES

Don't wait and miss this opportunity of a lifetime. The growth business of the next decade is here. All of us will be needing your survival skills before this rape of the money system is over. Start putting the food shelf lists, bridge locations that are out of the winter wind, best spots to sell bottles and aluminum cans, used free clothing and overnight shelters together. Stand outside the un-employment offices and sell them. Read the book 'Who moved my Cheese' and you can become a consultant or life coach.

[WorkingClass]

Screw you. Learn it the hard way like we did.

[hapiguy]

My wife and i are losing, on average, $1000 Dollars per day on our small investment, we can go no where, not gold, not bonds, we were locked in by a Honest Adviser. Retired, scared and hateful of the Repulicans
who have created this Depression from Reagan on..they wanted it all, they got it all, and now the funeral of Middle America..b­read lines anyone

[PumaAnn]

At least you're not going to have to pay O's capital gains taxes. LOL*

I just have to be philosophical.

Welcome to Wall mart......­.aisle 3.

[GerryS]

there are always options, even if you are "locked" in- you can even use your IRA's to divesify w/o paying capital gains or any penalties. see a certified financial planner-

[Erdgeist]

Just for now, put a total ban on "short selling" and reinstate the uptick rule, permanently.

[iambusto]

No ban on "short selling". Only on naked short selling.

Short selling has its purpose. Short sellers punish companies that put too much leverage in balance sheets, that do accounting tricks etc.

If there were no short sellers, how would you even expect a stock to trade anywhere near its true value. Let the short sellers punish the companies that are run by idiots.

Naked short selling should be banned because it creates "phantom shares" and are illegal both in form and substance.

short sellers help in "price discovery" as much as buyers and sellers of stocks in the market.

[GerryS]

the CDS cowboys had a lot to do with this too. these derivatives should have been outlawed a while back-

[WorkingClass]

I'm warning you. Keep your shorts on or there will be trouble.

[Erdgeist]

I said "just for now" which doesn't mean forever. I agree that "naked short selling" is pernicious as was Cox's imbecilic decision to get rid of the uptick rule that Joe Kennedy put in long ago who understood the market.

I am not interested in the academic pov - which is largely abstract. I see financial markets as little more than a dangerous form of gambling - and going back to the economist John Rae, the market should be massively taxed. Another danger is the huge derivative market, some 600 trillion dollars! This is horrific. Your can read about it here: http://angrybear.blogspot.com/

[studlyguy]

What is happening ,is the downfall of a nation,and the f a s c i s t government to even suggest that we're not in a recession is laughable if it wasn't so tragic,their right though were not in a recession,we're in a economic DEPRESSION!

[FreedomCorpse]

The windows at these firms don't open anymore so they can't jump out to the streets below....b­ummer

[LRM216]

Thank God they don't. None of the people that should be jumping will - they have not been hurt financially - just the opposite. They'd just ride on down with their "golden parachutes­." It's the little working class American, like you or me, that would need to do the jumping.

[GerryS]

dow is trending down today- will it close negative? possibly-

[angry expat]

Pull your money out of the corporate banks and focus on credit unions in your area.
Pool your money at the community level and only spend locally.
Stop buying brands or frequenting chain stores.
The only way out of this is to create alternatives to a system that was flawed by nature.
The problem with this country is that too many people are obsessed with being rich for minimal effort!!!!!

[iambusto]

go back to your cave !!

[Hare]

Alternatives is a good word. The last sentence of angy-expat is correct. Remember greed is what has ya'll in a pickle. For the common folk, we've been mashed up since the early nineties. So middle America, welcome to our world of insecurity. not having enough and having to go without.

[BethStuart]

I saw that the central banks including the Fed pumped another $180 billion into the world financial markets today in an attempt to maintain liquidity. I wonder if McCain has any idea what's going on.

[MMJones]

http://www.latimes.com/news/columnists/la-oe-brooks18-2008sep18,0,2481300.column

Read it and weep. Another milestone in the Bush-McCain Republican policies' takedown of America.

OBAMA/BIDEN '08

[arvay]

Now is the time for progressive forces to seize the moment.

First we need to win the election and put a Democrat president and Congress into power.

The Republicans, ironically, are nationalizing -- or at least socializing -- the nation's financial industry.

The precedent is being set that the government has the authority and even obligation to regulate and even supervise such critical parts of the economy. That means, for example, the healthcare industry, the oil companies and other energy companies, the defense industries, automobiles, heavy industry,media companies and the like.

If Obama and the Democrats take control, a system of governmental oversight and planning -- a national economic plan -- could be put into effect. All of these leading industries' leading minds could voluntarily help design the plan -- or face a kind of "draft." Help or find yourself unable to find work.

Time to get tough, and unscrew these people from power, yank them out of their gated communities, drain off their unreal financial gains and make them work for a living.

Plus, the Obama administration could cherry-pick among the Bush-enabled "security" measures to keep tabs on those business renegades who'd try to undermine the system, while freeing most Americans from unwarranted scrutiny.

Think this is brutal? This is a struggle for power, we need to play rough, more rough than our opponents if necessary.

We need to get there first and take real power, economic power, away from the neocons.

That's our choice, and our opportunity.

[LRM216]

You've had the democrats holding the reins for the last how many years???? They've done a real swell job.

[trollsbwild]

Bull. Reagan deregulation started this bgall rolling. Bush finished the job. He bankrupted three businnesses. At least he found his niche.

[PumaAnn]

No kidding. They are worthless.

[arvay]

Two years, and facing certain vetoes. But yes, Democrats have gone along with the Republican game, take Charles Schumer, for example, he talks liberal but he's totally in the pocket of Wall Street.

There will have to be a sorting out, a battle within the new Democratic administration, which I hope will result in the progressives taking control and using the power of the state to rip out all the neocon garbage, arrest, try and imprison hundreds, maybe thousands of miscreants -- both business types and corrupt politicians at all levels, and institute a national economic and social plan.

That would include tightly regulated financial markets, a working FDA, Health Dept., Education Dept., a national health plan, a national energy policy with escalating gas mileage requirements and substantial investments in alternate energy drawn from a hefty tax on oil company profits and foreign policy immune from special interest groups like AIPAC which would have to register as agents of a foreign power and obey strict financial and political influence rules.

A managed government investment program could actually help to fund Social Security, once the current gang of criminals is safely tucked away in federal prison.

I'm talking revolution by ballot box, a complete reversal of the criminal and incompetent Republican rule of our country.

[GuyRC]

Sure, start a stampede and then hand the reins to your opponent. Typical republican, can't man up and ride his own horse.