Strap on your helmets, going to be some volatility

I spent the last week moving out of the stock market into cash positions. There's a good chance this is the beginnings of a bear market and/or recession if the subprime crash spreads to other areas. Basically, easy money and incorrect risk assessments have propped up the economy for a while now, and it's starting to unravel. You can see my earlier post for a good review of the problem facing Bernanke right now, who's been doing a great job.

http://biz.yahoo.com/ap/070809/wall_street.html?.v=49

Stocks Fall on Rising Credit Anxiety

A move by the European Central Bank to provide more cash to money markets intensified Wall Street's angst. Although the bank's loan of more than $130 billion in overnight funds to banks at a low rate of 4 percent was intended to calm investors, Wall Street saw the step as confirmation of the credit markets' problems. It was the ECB's biggest injection ever.


The Federal Reserve added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.

The ECB's injection of money into the system is an unprecedented move, said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., adding that it offers evidence that the problems in subprime lending are, in fact, spilling into the general economy.

"This is a mini-panic," he said. "All the things that had been denied up until this point are unraveling. On top of this, retail sales were mediocre, which shows that indeed, the housing collapse is affecting the consumer."