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Weekend Videos

Just got back to blogging late Friday evening. Had to entertain my relatives from Canada who are in. Like the Irish a couple of weeks ago, they shopped liked it was Christmas in July to take advantage of the weaker dollar. I know one thing for sure. Foreigners sure love our “strong dollar” policy…

“Oil Crisis”
Becky Quick
CNBC, July 18, 2008

From the CNBC website:

The House may vote on releasing oil from the strategic petroleum reserve, with Senate Majority Leader Harry Reid and CNBC’s Becky Quick.

You can view the 3 minute 18 second video here.

Note to Congress- there is no quick-fix for the energy crisis. I’m starting to consider donating funds to Jim Puplava’s proposed program, “No Congressman Left Behind.”

Apparently, it’s a non-issue now anyway, seeing that after oil prices suffered their biggest weekly drop ever, Yahoo! Finance asks tonight, “So is it time to declare the energy bubble popped?” By the way, the Associated Press is reporting that terrorists are trying to enter the United States with European Union passports. Good thing Congress wants to deplete oil stockpiles meant for a national emergency. Like a major terrorist attack, for example. If you think 9/11 was a one-off event, I have a bridge that spans the East River out in NYC that I can sell you for a really good price…

“Is government clueless about economy”
Jim Jubak
MSN Money, July 18, 2008

From the MSN Money website:

Washington is talking us into a deeper crisis. Neither the President nor Congress gets it: When you owe as much as the US does, keeping your overseas creditors happy is the most important thing, says Jim Jubak.

You can view the 4 minute 7 second video here.

Jubak said in the segment:

The Saudi government has gone into serious discussions about taking its currency off the dollar peg.

“Christmas In July”
The Dandy Warhols, “Little Drummer Boy” (1995)
YouTube Video Link

Playing The Markets? Caution Is The Name Of The Game

Caution is not cowardly. Carelessness is not courage.

-Unknown

Here’s one for the traders and investors out there. I came across the following list of reasons yesterday from Bennet Sedacca (with Professor Rob Roy) of the financial website Minyanville.com as to why caution is a must in the markets these days:

1. Stocks are firmly in a downtrend.
2. Corporate spreads are rapidly widening.
3. Everyone I know is saying “All is well, buy America.”
4. European equities are taking out the lows of the year.
5. The capital-raising window is closed.
6. Earnings estimates are too high.
7. While much of the move in financials is done, it should spread to other industries.
8. If the “best of breed” are missing their numbers, what happens to the real dogs?
9. We are entering the worst part of the Presidential cycle.
10. We are at war. On multiple fronts.
11. The consumer is tapped out.
12. Corporate buybacks are gone.
13. Net equity issuance is very high.
14. Oil above $100 is very bearish.
15. The savings rate is 0.
16. The U.S. is actually one of the best performing markets in the world this year.
18. Level III assets continue to grow.
19. “Credit rot” is spreading from sub-prime to prime.
20. The dollar is sinking to new lows.
21. The Federal Reserve’s balance sheet is impaired.
22. Mutual fund equity cash remains low.
23. Individual investors are now taking money from their retirement accounts to survive.
24. The market is technically on the verge of breaking down.
25. We’ve broken the 200-week moving average in the Dow Jones for the first time since 2003.

Sedacca and Roy explained each reason in detail, and offered this advice:

Risks remain high and, as always, being cautious will only lose you opportunity - not capital.

Source:

“25 Reasons To Remain Cautious”
Bennet Sedacca, Professor Rob Roy
Minyanville.com, July 1, 2008

How Irish Tourists Saved The U.S. Economy

“There’s someone I want you to meet this weekend,” my girlfriend told me in June. Her relatives were coming in from Ireland for a family reunion in Chicago. “He’s travelling with his wife and her sisters. Maybe you guys could hang out and talk some football [soccer].” I met Connor that Friday night at the Water Tower Place in Chicago (from what I could understand, he wasn’t married, yet he did travel with a young lady and her sisters). While the conversation revolved mostly around the “beautiful game” and my plans for the “Great Escape” the next day to watch some of Euro 2008, he happened to mention that since he’d been in United States, he and the “Walsh girls,” as they came to be known by reunion participants, had shopped, shopped, and shopped some more. It seemed that every time I asked about Connor’s whereabouts, “he and the Walsh girls went shopping” was the response I got. On Sunday, the reunion shifted to Arlington Park Racetrack for thoroughbred racing. I saw the Irishman at the start of the day after he had just won a race, but didn’t see him later on. More shopping, perhaps? In the days that followed, my girlfriend joked to her sister that the Walsh girls single-handedly saved the U.S. economy. She also mentioned that she felt bad for Connor, as did I, as he was forced to endure the seemingly-endless spending sprees at the Chicagoland malls. However, this remorse was short-lived when her sister informed her that Connor bought just as much stuff as the Walsh girls did.

Robin Sparkles, “Let’s Go To The Mall”
YouTube Video Link

Anyway, I read a blog post by CNN’s Jack Cafferty earlier today that reminded me of our “economic rescue” by these visiting tourists from the Emerald Isle. Cafferty provides commentary and insight for CNN’s political program “The Situation Room.” He wrote:

The U.S. dollar just isn’t what it used to be. In fact, the dollar has been declining in value for 6 years now against other major currencies.

And, if you look around, it’s hard not to see the signs: hordes of vacationing Europeans are picking up bargains in the U.S., while Americans traveling overseas are hit hard with sticker shock. Canadians now flock here for shopping bargains, instead of the opposite. A Belgian company is attempting a hostile takeover of Anheuser-Busch, the largest brewer in the U.S. If the takeover goes through, it might be the first of many foreign takeovers of American companies.

While everything made in the U.S. is so much cheaper to foreigners, Americans are paying more for imported goods, while most are also grappling with rising food and energy costs. Since oil is bought and sold in dollars, the devalued dollar makes gasoline that much more expensive for Americans.

Some even suggest the continued decline of the dollar could one day lead to it being replaced by the Euro as the so-called “primary reserve” currency. There are stores right here in New York that now accept euros as payment.

Meanwhile, the message from Washington doesn’t seem to change much. President Bush has often talked about his support for a “strong dollar”, just last week saying “We’re strong-dollar people in this administration.” Really, Mr. President? You have presided over the most precipitous drop in the value of our currency in our nation’s history.

Source:

“Concern about sharp decline of dollar?”
Jack Cafferty
CNNPolitics.com, July 2, 2008

SUV Owners Remain Defiant Despite $4 Gasoline

Sounds like America’s love affair with the sport utility vehicle isn’t going away anytime soon. Back on June 5, the Chicago Tribune ran a piece about SUV owners who continue to drive on despite $4 gasoline at the pump. Robert Channick and Wailin Wong wrote:

But on the streets of suburban America, the gas-guzzling Suburbans, Durangos and pickup trucks roll on, sometimes driven apologetically, sometimes defiantly…

The U.S. is a country that has always been enamored with its cars, and the American love affair with the SUV has gone on strong for two decades, thanks to low gas prices and the consumers’ sense that the large trucks were the safest, roomiest way to transport suburban families without resorting to the totally unhip minivan. Car buyers also found they liked sitting up high, and SUVs allowed them to ride comfortably above other traffic.

Yet the SUVs hold on the American psyche remains too strong to be broken completely—even at more than $4 a gallon.

Interestingly, Channick and Wong wrote:

As for the dwindling group of unrepentant SUV owners, they might actually strengthen their resolve in response to high gas prices and the recent backlash “around the ostentatious consumption aspect, not only of gas, but metal and all the inputs of automobiles, and around the safety issues,” said S. Lochlann Jain, an assistant anthropology professor at Stanford University who’s taught a course on car culture.

“Once people get into a defensive posture, I think it can be harder to give that up.”

Jesse Toprak, an analyst with Edmunds.com, told the Tribune reporters:

You’re always going to have that subsegment that’s going to want their big, boxy, all-American tank.

Jim Hossack, vice president of auto sector consulting firm AutoPacific, elaborated:

SUV says America. It says John Wayne. It says freedom. It says outdoors.

With the price of gas at $4, this is what it says to me:

Source:

“Not all ready to ditch their SUVs”
Robert Channick, Wailin Wong
Chicago Tribune, June 5, 2008

Gold, Greenbacks, And Government Intervention

I remember reading a rather significant article by MarketWatch’s Peter Brimelow last fall. As someone who follows precious metals religiously, I had already been aware of the claims made by groups such as the Gold Anti-Trust Action Committee, or GATA, that the price of gold is being manipulated. However, on October 18, 2007, Brimelow let “the cat out of the bag,” so to speak, for the readers of that particular Dow Jones website. Brimelow wrote:

Nevertheless, for the longer term, the gold bug faction lead by Bill Murphy’s LeMetropole Cafe Website is cockahoop. It has long argued that the metal’s price has been repressed by what it calls “The Gold Cartel” an alliance between the official sector (central banks, the U.S. Treasury) and chosen instruments (key investment banks and co-opted bullion dealers and others) to create a financial assets boom.

Reason for rejoicing: The discovery by James Turk of the Freemarket Gold & Money Report that, as Turk puts it: “the U.S. Treasury quietly made a subtle change to its weekly reports of the U.S. International Reserve Position, which includes the U.S. Gold Reserve. This change was first made May 14… It says the U.S. Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported ‘INCLUDING GOLD DEPOSITS AND, IF APPROPRIATE, GOLD SWAPPED’ (emphasis added).

This description provides clear evidence that the U.S. Gold Reserve is in play. Gold has been removed from U.S. Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price-capping efforts. Gold placed on deposit gets loaned out by these bullion banks, and then sold into the spot market to try capping the gold price.”

Intervention, pure and simple as that. No, manipulation. Which, by the way, isn’t as conspiratorial as it sounds. Brimelow pointed out:

It may seem like an arcane point. But I remember when the idea that central banks were systematically selling gold at all was dismissed as crankishness. Yet it’s now universally acknowledged.

And why would Uncle Sam want to cap the gold price? The MarketWatch columnist wrote:

Turk’s conclusion: “This new evidence provided in the U.S. Treasury report as well as the rising gold price itself suggest to me that we are now witnessing the last scramble by the gold cartel to cap the gold price. It is a vain attempt by them, acting under the instructions of the U.S. Treasury, to make the world think the dollar is worthy of being the world’s reserve currency when in fact everyone knows that it is not. In short, the wheel has fallen off the truck. The dollar is heading for a train wreck. Use whatever metaphor you want, but the message is clear - the dollar is in serious trouble…

Fast forward to the present day. According to MarketWatch’s Laura Mandaro tonight, currency traders now suspect that American and European finance officials engaged in some “arm-twisting” at last month’s G7 meeting in an attempt to provide support to the U.S. dollar. Mandaro wrote:

Gains of 2% to 5% in the U.S. dollar from a key low point last month, combined with recent press statements from anonymous senior finance officials, have fostered suspicions that the group of industrialized nations backed up their public statements with some backdoor negotiations.

Madaro referred to an analysis of euro and dollar trades by Greg Anderson, head of foreign exchange strategy at ABN AMRO, which suggested “the U.S. and Europe may have pressured central banks from the BRIC countries– Brazil, Russia, India and China– and sovereign-wealth funds to temporarily stop converting 20% to 40% of their newly accumulated U.S. dollar-holdings to the euro.”

This pressure, along with signs that the European economy is struggling, could help explain why the greenback has stabilized. Mandaro suggested that analysts now suspect finance officials, especially from the United States, changed tactics around the time of the G7 meetings. The MarketWatch reporter wrote:

The Treasury Department, while officially supporting a strong dollar policy, had been content to see the dollar slide since it helps U.S. exports, analysts said. That laissez-faire approach seems to have changed in the last two months, as the U.S. government has seen the weak dollar help push up oil, agricultural and other commodity prices to record highs.

Disturbingly, some are making claims of direct government intervention in the market. However, Mandaro noted:

But many currency analysts say such a direct intervention is unlikely.

For one, the United States’ foreign exchange reserves are relatively small at about $75 billion, making dollar buy-backs little more than symbolic.

And the G7 statement, at least at the time, didn’t suggest a direct intervention was round the corner. The last time the U.S. dollar experienced a coordinated currency intervention, when European monetary authorities in September 2000 convinced other G7 members to support the then-depressed euro, the policy statement specifically mentioned the euro. This most recent time, the statement just mentioned exchange rates in general.

The United States doesn’t usually intervene: From August 1995 through December 2006, the United States only intervened twice in the foreign exchange markets.

“Last time.” “Doesn’t usually.” And what’s to say government intervention isn’t occurring this time around?

So much for the notion of “free markets.”

Sources:

“Gold bugs: ‘We told you so…’”
Peter Brimelow
MarketWatch, October 18, 2007

“Dollar rally, leaks put fresh focus on G7 meetings”
Laura Mandaro
MarketWatch, May 15, 2008

The Failing Fed

Following through on a recommendation yesterday, I read the post “5 Reasons Why the Federal Reserve is a Failure!” from Bankaholic.com. It’s a great piece (especially the part about the Fed awarding gold stars to those deserving detentions), and I think you’ll enjoy reading it over the Easter weekend. Having obtained permission to re-post it, here is the article in its entirety:

No single quasi-private institution has as much influence on the worldwide economy as the Fed, and as a leader can head this institution for an indefinite term, no one man is as influential on the markets as the Fed Chair.

The Dollar has plummeted in the currency markets and shows few signs of recovery or even stabilization. The new style and policies that accompanied Bernanke into office have made the Forex markets more volatile than ever and even more difficult to predict. An examination of what has gone awry can help Forex traders understand this new era at the Fed.

1. The Fed ignored the signs
The Fed has stated that it will never act as a regulator in any financial market, but it has the duty to use its influence for reform when it sees signs of consumer exploitation. Since as early as 2001, at least two senior officials inside the Fed urged its board to call for tighter regulations in the housing markets, especially in abuses that were clearly evident in the handling subprime mortgages. At the time, the White House was singing the praises of America’s new society of ownership, so the Fed took this cue and did nothing.

These deceptive loans were making possible the dream of home ownership to millions of Americans, even to those who could not come close to affording it. Now these same Americans are living through a nightmare of foreclosure and debt, much in thanks to the Fed’s willingness to ignore long-term repercussions and revel in immediate accomplishments, no matter how hollow and transitory they might be.

2. The Fed did too little too late
Other than advocating for reform, the Fed should have fully committed to a strategy of lowering target interest rates. Instead, Bernanke procrastinated, and when he did finally announce a cut, it was insufficient and ineffectual, at best. On December 11th, the Fed dropped its benchmark rate by a quarter of a percent rather than the half of a percent that had been called for by analysts and investors. Wall Street promptly responded, as the Dow plummeted nearly 300 points in one day.

The Fed might argue that this cut was prudent and that a more drastic cut would have unnecessarily fueled a rise in inflation. However, many view the Fed’s temerity in this matter as merely an extension of its inertial proclivity towards inaction.

3. The Fed kept interest rates too low for too long
Though this may seem to contradict the statements above, one of the reasons that the Fed might have hesitated in cutting rates is that they were already too low to begin with. Greenspan’s long tenure at the Fed was defined by a tendency to aggressively cut interest rates, which he began to do frequently in 1987 after the drastic correction in the stock market.

This initial move helped stave off disaster, but the further rate cuts of the late 1990s eventually led to the dot-com bubble. Rates should have been raised again in the early 2000s; if this had been done, the US might have avoided the furious borrowing that has led to the current credit crunch.

4. The Fed’s view of inflation is flawed
The Fed seems rather befuddled by this important economic indicator. The soaring costs of food and energy are a phenomenon is the US and worldwide, but the Fed does not take these developments into account.

The Fed’s analysis focuses on “core inflation,” which excludes a number of indices that it views as transitory, including energy and food costs. “Headline inflation,” which does take these costs into account, is favored by European economists, who view high energy prices as a long-term trend. By choosing to disregard the rising costs of a barrel of crude oil and a bottle of olive oil, the Fed is ignoring reality.

5. The Fed gives gold stars to those deserving detentions
Fed policy following the recent economic slowdown has done nothing but reward those who helped caused it. The majority of financial stocks have suffered of late, and justifiably so. However, the Fed seems dedicated to bailing out even the worst of the perpetrators with the recent set of economic interventions that it has enacted.

While working to eliminate any downturn in the market might seem feasible for short-term success, it is a purely shortsighted endeavor that will hurt the economy in the long run. In order for a free market to truly exist, bear markets must coexist peacefully with bull markets. Unfortunately, the Fed has its bright orange vest on and is going bear hunting. This is a doomed outing, and one that is going to get us all hurt in the end.

Source:

“5 Reasons Why the Federal Reserve is a Failure!”
Bankaholic.com, March 15, 2008

European Banks Say U.S. In Recession

According to Reuters earlier today, Daniel Bouton, the chairman and CEO of French bank Société Générale, said that the U.S. economy is in a recession already. The head of one of France’s oldest banks said, “There is a recession in the U.S. for the early part of 2008.” This follows a statement yesterday by the second largest bank in Europe, Swiss-based UBS, which also pointed out the the U.S. economy is in recession. According to Reuters, UBS economists said that a weakening consumer sector, in conjunction with problems in the housing and credit markets, have pushed the United States into a mild economic recession. In a research report yesterday, UBS economists responded to questions of whether or not a recession had taken hold in the U.S. by stating, “It’s not coming, it’s here.”

The Swiss bank predicted that U.S. gross domestic product will fall 0.60% from the end of 2007 to the middle of 2008. Reuters’ Richard Leong noted that last month, the U.S. government said the economy grew at an annual rate of 0.4% in the fourth quarter of 2007 and expanded 2.2% for the entire year, the weakest pace in five years. UBS is predicting that the contraction will be led by the first decline in personal spending since the recession of 1990-1991.

Banks May Write Down Additional $300 Billion

Yesterday, global strategy consulting firm Oliver Wyman said in a new study that an additional $300 billion in write-downs related to the U.S. subprime mortgage meltdown may be announced by banks before the crisis is over. Back on January 18 I noted that write-downs had already surpassed $100 billion. In a press release picked up by Yahoo! Finance yesterday, John Colas, Managing Director and head of the North American Corporate Strategy Practice at Oliver Wyman, said:

The credit crisis is unlikely to resolve itself before the end of this year. We also see strong likelihood of price corrections in emerging markets and this combination will extend the value loss and turbulence witnessed in 2007.

The management consultancy said in its “State of the Financial Services Industry” report:

We expect a stormy 2008. While governments, central banks and regulators scramble to address the aftermath of the sub-prime fallout, several other crises are mounting.

These other disruptions include:
• A significant slowdown in European real estate markets, especially in Spain and the UK
• The continued weakening of the U.S. dollar
• A collapse in commodity prices
• A fall in Chinese and Indian stocks

The financial services industry should expect “turbulent conditions for 2008 and beyond.” Oliver Wyman predicted that American banks are especially at risk. From its 2008 report:

North American financial services firms will have a tough year. Market uncertainty, combined with further write-downs and expected home-price and loan-volume declines, implies more squeezes on earnings. Banks most likely will have to increase loan-loss reserves.

In North America last year, the financial sector lost 13% in market value, second only to Japan. In contrast to the United States, the value of financial companies in Canada grew 12%.

For the first time since 2002, the global market value of the industry fell, according to the annual report. Controlling for exchange rates, the industry lost 7% of its market value last year. While $300 to $400 billion was gained in red-hot emerging markets last year, financial institutions lost more than $1 trillion in mature economies.

Soros: Worst Financial Crisis Since World War Two

George Soros, the Hungarian-born billionaire investor, philanthropist, and author, told the Austrian publication The Standard that the world was facing the worst financial crisis since World War Two. Speaking to other news agencies, the former Quantum Fund head also warned the economies of the United States and United Kingdom are threatened by recession. Soros, most widely known as “The Man Who Broke the Bank of England” after he earned $1.1 billion speculating on the British pound in 1992, said in The Standard interview released Monday that, “The situation is much more serious than any other financial crisis since the end of World War Two.” He explained that over the past few years politicians subscribed to something called “market fundamentalism,” which, he said, was “the wrong idea.” Soros told the BBC earlier today:

Markets have been left to their own devices and the authorities came to rely on the markets to right themselves. They ought to have known better. They ought to know that the markets don’t necessarily right themselves.

As a result, Soros said, “We really do have a serious financial crisis now.” Today at the World Economic Forum in Davos, Switzerland, the legendary investor explained:

From the 1980s we had the belief in the magic of the marketplace, and the authorities were so successful that they started to believe in this market fundamentalism. That’s gone too far.

He added, that in times of crisis:

They suspended the rules and they bailed out the banks. That created an
asymmetric incentive system, a moral hazard, that allowed the expansion of credit.

The current crisis has its roots in the U.S. housing boom and subsequent bust, along with the resulting subprime blowup. Now, Soros says the monetary authorities must be ready to rescue markets in turmoil and should impose more regulation, not less.

“Yeah, it’s that bad…”

When asked during The Standard interview about whether he thought the United States was headed for a recession, he said, “Yes, this is a threat in the United States.” He also added that he was surprised of how much the threat of a recession in Europe has been downplayed. Today on the BBC, when asked if the U.S. and U.K. economies were headed for recession, Soros replied, “I think it will be very difficult to avoid it.”

The chair of Soros Fund Management also talked about the outlook for the U.S. dollar. According to Reuters, at Davos today he said the world is no longer willing to accumulate dollars. Soros claimed:

Financial markets do need a sheriff … The rest of the world is unwilling to accumulate dollars. The present crisis is the end of an era based on the dollar as the international currency. We need a new sheriff, not Washington consensus.

According to Bloomberg, the U.S. dollar’s share of global foreign-exchange reserves fell to a record low of 63.8% in Q3 2007 as demand for U.S. assets waned after the collapse of the U.S. housing market (from International Monetary Fund data). This was down from 65% three months earlier. The greenback dropped 11% against the euro and 13% against the yen in the past year, continuing its decline in five of the past six years.

The legendary investor linked the growing financial crisis with the dollar’s decline. Soros told forum attendees today:

The current crisis is not only the bust that follows the housing boom, it’s basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency.

“Everybody, sooner or later, sits down to a banquet of consequences.”
-Robert Louis Stevenson, Scottish essayist, poet, and author

Fed Curve Ball Gets Stock Market Out Of Tough Inning

Message to the Federal Reserve. Nice curve ball. Pre-empting a massive stock market plunge on Wall Street, an hour before trading was to begin yesterday the Federal Reserve cut its benchmark interest rate by 75 basis points, the most in 23 years. As a result of the action, the Dow Jones Industrial Average plummeted nearly 465 points after the open, but recouped the bulk of its early losses by the end of the trading day, ending down just 128.1 points, or 1.1%, at 11,971.2. The S&P 500 ended the day down 14.69 points, or 1.1%, to 1,310.50, a 16-month low for the index.

What A Wookiee!

Earlier today, the Wall Street Journal’s Economics Blog noted that the stock market could really have been in big trouble yesterday if it hadn’t been for the Fed. The blog talked to Oberlin College economist Ken Kuttner about the market’s comeback. Kuttner co-wrote a paper in 2004 with Fed chair Ben Bernanke that talked about how stocks rose following interest rate cuts. While this didn’t happen yesterday, the economics professor did have this to say:

If they hadn’t cut, I’m sure you would have seen a blood bath, but as it was, it was just a pint or two.

Even so, the game’s not over just yet. After the end of trading yesterday, the New York Times spoke to Bernard Connolly, chief global strategist for Banque AIG in London, who said:

Things would be worse if the Fed hadn’t cut and it would be worse if the E.C.B. doesn’t cut. Is it enough? No. It still doesn’t give the market what it wants in terms of rates cuts. There are further problems in the stock market and the real economy.

Traders are now looking to the European Central Bank for any hint of a rate cut. According to the Agence France-Presse an hour ago, it doesn’t appear that the ECB is in any hurry to follow their American counterpart. European Central Bank president Jean-Claude Trichet was quoted by the news agency as saying:

We don’t have two needles on our compass, one for the real economy and one for inflation, we just have one indicator.

Which shows the way to stable prices, Trichet told European Union deputies in Brussels. He added:

I trust that in all circumstances, but even more particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations.

The AFP explained:

For Trichet, it was a matter of clarification — the ECB will not follow its US counterpart, which slashed the key federal funds rate by three quarters of a percentage point on Tuesday to head off the spectre of a recession in the world’s biggest economy.

Looks like the Fed may want to get another pitcher warmed up in the bullpen.

Stock Markets Fall Around The Globe

Returning to work on Monday is hardly ever fun. Losing a ton of money makes it even worse. While American financial markets were closed in remembrance of Martin Luther King, Jr., stock markets around the world were being hammered.

Indexes in Japan, China, Hong Kong, India, South Korea, and Singapore fell at least 3%. Indian stocks were punished severely, dropping nearly 11% at one point in the trading session before finishing off more than 7%. The Australian and New Zealand stock markets have now experienced losing sessions for 11 and 13 days, respectively.

Photo from DailyHaHa.com

The carnage in equities spread to Europe. The pan-European Dow Jones Stoxx 600 index ended down 5.4% at 309.67. At one point earlier in the trading session, the index earlier reached a low of 308.69, which was the largest one-day percentage drop since the September 11 terrorist attacks. The index has lost around 23% from its mid-2007 high of 400.99. The French CAC-40 index ended the day down 6.8% to 4,744.45. The German DAX 30 index was down 7.2% to 790.19. The U.K. FTSE 100 index declined 5.5% to 5,578.20.

Making its way to the Americas, the global sell-off spread to Canada and Latin America. The S&P/Toronto Stock Exchange composite index sank 4.7% to end the day at 12,132.14. Brazil’s Bovespa fell 6.6% to 53.694, and Mexico’s Bolsa index declined 4.8% to 25,444.

According to MarketWatch today, losses from financials were largely to blame after U.S. bond insurers came under attack by a ratings agency, and the proposed economic stimulus plan from President Bush failed to convince investors that it would be enough to prevent a recession in the United States. The stock sell-off occurred after the worst weekly performance on Wall Street for five years.

All eyes are now turned to Wall Street, which resumes trading Tuesday. As of this afternoon, the Dow Jones Industrial Average futures contract was down 520 points to 11,586, the Nasdaq futures were down 76.25 to 1,773.25, and the Standard & Poor’s 500 futures had fallen 60.3 to 1,265. According to MarketWatch:

If futures contracts traded on a day when U.S. stocks weren’t even due to open are anything near accurate, then markets will be in for a major decline on Tuesday, with concerns about bond insurers and the health of financial institutions dragging markets lower.