Another day, Another 300 point swing

After shooting up 140 points, the Dow fell 146 points (the NASDAQ had an even bigger swing, moving up 1% and then down 1.4%)

Instead of "14,000 I hardly knew you" it is turning into "13,000 I hardly knew you"

I am now feeling more confident in my assessment that many deals are being postponed because financing terms are changing. That takes the air out of stock price increases.

But the liquidity issues have yet to be addressed. Every day we seem to read about home builders and lenders writing off ~$1B in business. Today:
* IndyMac announced that they had to buyback $218M in non-performing loans while its non-performing loans hit $500M+. BTW, IndyMac specializes in Alt-A, which is higher quality than subprime.
* Sowood Capital, a hedge fund, announced that it lost 50% of its $3B fund. It had to sell at a loss to meet margin calls
* MGIC announced that $1B in subprime mortgages are worthless
* GMAC announced a $254M loss. They also revealed that subprime lending fell from $6B last year to $700M this year.
* For all lenders, delinquent loans jumped from 0.5% last year to 1.1% this year.

In 1 day we have announcements of $3B of loans being made worthless and $5B in loans not being written. That's a lot of liquidity that suddenly disappeared.

And it isn't stopping.

Given that hedge funds spread their investments around and in the stock market, any margin call is negative for the market overall. And that is what is happening - funds are unwinding positions in fire sale mode. This will take at least this quarter and possibly the next to resolve.