The markets are NOT in a free fall!

However, as I have said for a long time, we have not seen the bottom yet.  I have told my students, friends and family - the probability of when the U.S.A. hits the bottom of the recession will not come until at least March 2009, in my opinion.  Furthermore, there is a greater probability that the bottom will come later, not sooner.

           

From the New York Times article (click to go to the article with the above graph):

Wall Street had spent the day trying to make sense of a rapidly changing financial landscape on Monday as the State of New York offered American International Group a lifeline, the Bank of America began the task of assimilating Merrill Lynch and Lehman Brothers started its journey into bankruptcy.

New York State officials stepped in Monday to try and help the world’s largest insurance company, A.I.G., as it sought financial assistance in the face of a potential downgrade from credit ratings agencies.

Bank of America walked away from buying Lehman Brothers because there was no guarantee by the government, as JP Morgan received when taking over Bear Stearns.  However, B of A found a much bigger prize in buying Merrill Lynch!!:

Although Mr. Lewis said Monday that no decisions had been made about layoffs, thousands of people were expected to lose their jobs. One group that seemed relatively safe was Merrill’s 17,000 financial advisers, which Mr. Lewis called “the crown jewel of the company.” Bank of America may offer Merrill’s brokers a bonus to stay after the merger, he said.

For my past students, you will understand how the NYSE works with the specialists determining the price:

In the minutes leading up to the 9:30 a.m. opening bell, dozens of traders clustered around the posts where A.I.G. and Bank of America were bought and sold, shouting bids and offers as the specialists who oversee trading tried to determine the proper opening prices for the stocks.

Yields on Treasury notes plummeted as investors scrambled to hide their cash in ultra-safe government notes. The dollar also weakened against several foreign currencies.

The silver lining??!! Hello:

In another surprise development, the price of crude oil dropped more than $7 a barrel in electronic trading, nearing the $94 mark, as investors appeared to bet that a global downturn would cause a sharp drop in demand for energy. Oil closed at $95.71, down $5.47.

I love this comment too:

Monday’s sell-off, though widely predicted, came despite moves by central banks around the world to restore investor confidence by injecting enormous amounts of capital into the financial system.

WIDELY PREDICTED!!! 

Grin!

Finally, the best comment at the end of the article:

“Confidence has really collapsed,” said Yann Azuelos, fund manager at Meeschaert, an asset manager in Paris. “With the rescue of Fannie and Freddie, we thought the worst had passed. Now we know it hasn’t.”