Tuesday's Big Bounce Back

Yesterday's big +316 point bounce back for the DOW just goes to show that there is no way to guess the direction of the stock market in the short term. However, the issues that are causing concern in boardrooms across the country still remain. E-Trade, the discount brokerage, lost a whopping -60% on Monday after Citigroup analyst Prashant Bhatia raised the possibility of bankruptcy due to write-downs of E-Trade's sub-prime related investments. That sent shock waves through the financial sector as firms such as; Merrill, Citigroup, Bank of America, Bear Sterns, HSBC, Wachovia,Washington Mutual, etc. try to grasp the limit of exposure they have to these illiquid, hard-to-value, convoluted securities. Merrill and Citigroup have both let go of their CEO's due to billion of dollars of losses and the realization of last year's overstated profits under their watch. Interest rates are expected to be lowered another -.25 bpts at the Fed's 12/11/07 meeting, however, if we do not see at least another -.25 bpt cut materialize the market may react very negatively.