Market outlook: Painful times

Lest there be any doubt, the markets are heading down a lot more down. If you had any doubts, look at the volume of Fridays drop in the chart below, with 280 million shares traded. Average volume runs about 180 million shares these days. The volume for the last two days should have woken you up to what's happening. The major stock of the Dow 30 stocks responsible for this spike at the close was Cisco's stock. This market move of the past 30 days is a systematic steady erosion and not the quick panic correction followed by a nice rebound. This is eventually going to get quite painful for most people.

Most people will watch the drip, drip drip of their losses like a deer caught in the headlights. Those of us who are on the short side of this market, will reap the rewards of our patience. But here this, I will not take much pleasure out of this as the true meaning of this decline was avoidable and many fine people are going to be hurt financially. As a newsletter I read today said, "Wall Street thinks all is rosy, but Main Street knows it is a depression."

I have posted many charts on this site and showed some 30 year charts in those posts. The future does not look rosy. I wish it did! But we must face the reality that our elected officials are not trying to solve our countries problems. And let's be honest here folks, the Republicans are still saying no to any taxes, even for millionaires. They would rather see us default on our debt and try and win some political advantage then to fix the economy. I realize I am being partisan here, so save your emails to me. The last time this happened was when the then Speaker of the House, Newt Gingrich, shut down the government. They lost the next election smartly. It wasn't necessary. People were reacting to the inflexibility of those in power. If everything is on the table, so is taxes!

Cisco stock hits multiyear low

Cisco stock this morning in pre-market has hit a multiyear low breaking below $15/share to $14.93 and the big question for investors is when will the drop stop. The previous low was at about $13.80 in March 2009 and it looks like the stock is on its way to retesting that low, as seen in the chart below. The stock is dragging the Dow down and it appears will remain one of the Dogs of the Dow for the foreseeable future, given the mia culpa by its CEO John Chambers recently in the press. It is my opinion that Cisco's turnaround needs require the same medicine that IBM needed in its day, a Lou Gerstner type CEO. I know, as I left IBM before Gerstner arrived, because I saw that IBM was inflexible and flexibility was needed at the time. It took Lou Gerstner to create that flexibility and kill many sacred cows. The person who created the problems can not turn around the business, as he is usually blinded by his own previous decisions and has unknowingly strong attachments to those decisions made in the past being "right." It's a shame the Board doesn't act swiftly to stop this slow death from playing out. There are many very smart employees at Cisco and the talent pool is very deep. The company needs a transformation and a break from past misguided decisions. Ego has killed many a business. Keeping one's Ego in check takes help from experts and a reverence for self examination. I don't think this CEO has that in him.