Markets confirm we are in for a further drop

The stock market today dropped to a low of 8616 on the Dow or off 412 points in morning trading. This while Congress has been getting an earful from Ratings firms such as Moody's and the S&P. Testifying for Moody's was a former Credit officer who said the system was corrupt and that the reason was that firms like Moody's saw their customers as the Investment community rather than the public, as many firms paid Moody's and other firms so it was a conflict of interest fro them to raise issues. One line of questioning from Chairman Henry Waxman of CA, was particularly enlightening. He asked, when sub Prime loans were made, did they know buyers would not be able to pay for the loans over the life of the loans? Those testifying said they knew that the Homeowners would not be able to pay for the loans. He asked again, then you are telling me that lenders knew this? Again he heard, yes. How do you explain that the ratings of those companies doing the lending were not affected? He was told that there was an assumption built into the model that showed appreciation every year on the value of the home and that, "THEY NEVER CONSIDERED YEARS WHERE PRICES MIGHT DROP OR EVEN STAY EVEN"

And so my friends, this economy has been built like a House of Cards and the wind has been blowing and will continue to blow, as many unwind from bad positions, driving prices lower and the cycle will continue, until faith is once again restored. How long will it take? It will take a new President who can lead and command respect by his actions and his deeds. That means at least until mid 2009 before we all have a sense even with Barack Obama winning the Presidency. I fear a McCain win will keep the spiral going on for much longer than with an Obama presidency.

Therefore, the Dow most certainly in my view will go as low as 7,200-7,400 range and the Nasdaq the same percentage wise.

UPDATE 3:30PM PST

The Dow did drop 700 points near the close but managed to close losing 512 points to 8,519 which was above Dow 8,500. The volume increased in the last 20 minutes and today's volume was significantly higher than Monday or Tuesday's volume.