Of Countrywide, Cash, and Calamities


"Volatile" is likely an understatement when trying to describe the stock market's recent doings. We sift through some of the analysis out there

Could it get more stomach-churning in the financial markets? On Aug. 16, Asian and European markets tumbled as credit concerns worsened. In the U.S., the Dow Jones industrial average plunged more than 300 points before surging into positive territory in afternoon trading, and finally closing down a mere 15 points. As the markets pitch and weave, investors are scrambling for insight and analysis. Here's a look beyond BusinessWeek at what others are saying about the market turmoil.

Is It a Calamity Yet?

St. Louis Fed President William Poole offered little comfort to investors when he said that only a "calamity" would cause the Federal Reserve to cut interest rates, because the economy itself is so strong. That led Ros Krasny at Reuters to wonder when a crisis becomes a calamity.

Countrywide: One Last Longshot

How funny are the guys at Minyanville? They make us laugh, they make us cry. O.K., mostly cry these days. They took note of the decision by Countrywide Financial (CFC), the country's biggest mortgage lender, to borrow $11.5 billion—yes, billion—from dozens of banks to try to shore up their financials, as rumors of bankruptcy swirled. A sign of stabilization? Maybe not. Here's their take:

"Think of it like this. It's late December. Snowing. Aqueduct racetrack. The last race is in four minutes, you're down $287 and seven beers. But you're not finished yet. There's still one race left, the last race, the one they call the Widowmaker. Few losers ever survive the Widowmaker. But there it is, calling to you, asking for one last wager, one final grasp. Ah, but there's a slight snag, a hitch in your giddyup so to speak. The only paper in your pocket is a losing exacta ticket from the last race that came in backwards. We're talking the only paper in your pocket. You sold your unlimited subway card after the fifth race, plunged full-bore on a filthy hot dog, a beer and a 9-to-1 shot that finished next-to-last. You are Countrywide."

Cash, Wonderful Cash

Never fear. America's largest companies will be protected from the current credit crunch because they are sitting on enormous stashes of cash, in many cases the largest they have ever held. The cash reserves of the Standard & Poor's industrials amount to well over a year's worth of earnings. Bottom line is that large U.S. companies are in better shape than they were in previous crunches, like when Long Term Capital Management collapsed in 1998.

Investors Flee for Safety

Cash is looking pretty good for individual investors these days, too. They put nearly $40 billion into money-market funds in the week ended Aug. 14, helping to push money-fund assets to record levels. Fear rules over greed these days.

Bull or Bear? No One Knows

Henry Blodget, the onetime star Internet analyst who now writes a blog about the Internet business, weighs in on the pundits pontificating about the direction of the stock market. Is this a correction in a bull market or the start of a bear market? "Listen to the parade of smart guests on Bubblevision if you want—their reasoning runs the gamut from impeccable to hilarious—but just don't let yourself get seduced into betting on one argument or another. Because no one knows," he writes.

A Timeline of the Meltdown

From the BBC, a nice timeline of the troubles in the credit markets and beyond. It was less than two months ago that Bear Stearns (BSC) ran into problems with its two hedge funds. Just a couple weeks ago, everything looked O.K.

John Cady is Information Services Technology Manager for BusinessWeek. Jamie Russell is Information Services Director for BusinessWeek.

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