Hurricane Season

09/18/2008 12:00 am EST

Focus: GLOBAL

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

I’ll bet the antidepressant business has boomed in the last week! After living 18 years in Florida (no longer, thank goodness), you’d think I would be fairly immune to hurricanes. Yet, I was glued to the TV all night the evening Hurricane Ike hit Texas. Current estimates forecast a possible $22 billion bill for this one.

But no sooner did we take a deep breath than the financial markets showed us just how ugly they could get. In just two days, we were faced with the bankruptcy of Lehman Bros. (NYSE: LEH), the last-minute save that saw Merrill Lynch (NYSE: MER) announce its merger with Bank of America (NYSE: BAC), and the colossal $85-billion bailout of American Insurance Group (NYSE: AIG).

These calamities took their toll on the Dow Jones Industrial Average, sending it down 504 points on Monday, its worst decline in seven years. And despite a triple-digit tepid recovery on Tuesday, it gave up another 450 points on Wednesday.

The contagion spread to stock exchanges around the world and hit the American Depository Receipt business pretty hard, too. Russia’s markets fell so fast that the government halted trading—indefinitely. The RTS has lost nearly 58% of its value since May. Across Europe, exchanges joined suit, and in Asia, the Hong Kong exchange closed at a 23-month low and the Nikkei fell to its three-year low.

The pundits are having a field day, divided between “the end is near” (good news) and “we still have 15% further to fall” (bad news). However, there were a few signs of life:

  1. The Federal Reserve held short-term rates steady at 2%, and that may bode well for the mortgage business which saw new purchase applications and refinancing rise last week.
  2. British banking giant Barclays agreed to buy Lehman’s investment banking and trading operations, saving up to 10,000 jobs.
  3. Chinese analysts are expecting an announcement for a stimulus package to shore up their economy and markets.
  4. Gold bugs cheered as the metal climbed as high as $831.10 again.
  5. Despite a bounce on Wednesday, crude averages around $93 a barrel now.
  6. The dollar continued to advance against the euro, although it pulled back Wednesday as gold rallied.

It’s times like these that require extra patience and fortitude on the part of investors. Bailing out when the market is panicking is usually not a good idea. Instead, this may be a good time to re-evaluate your goals and the strategies you use to achieve them and plan what you’re going to buy next.

This week’s features began with Chris Gilchrist, editor of EveryInvestor, who champions a strategy of steady, regular investing—through good times and bad.

Allan Nichols, editor of Morningstar InternationalInvestor, offers a close look at a pharmaceutical manufacturer with a robust pipeline.

Yiannis Mostrous, editor of Silk Road Investor, expects continued and plentiful profits at a Chinese port operator.

And Edmund Harriss, investment director of Guinness Atkinson Asset Management, joined us for our Q&A, explaining why he believes continued demand in China will provide opportunities for carefully-selected sectors.

For now, hold steady. As Emily Dickinson wrote,

If I Should die,…
’Tis sweet to know that stocks will stand
When we with daisies lie,
That commerce will continue,
And trades as briskly fly.

Who knew that she was really a trader with the soul of a poet?

Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.

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