World markets plummet in China’s wake

Kai Ryssdal Feb 27, 2007
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World markets plummet in China’s wake

Kai Ryssdal Feb 27, 2007
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KAI RYSSDAL: Those gains the markets had been enjoying so far this year? Record highs and all the rest? They’re gone. All three major indices are now below where they started the year. Not necessarily a bad thing for those who believe a correction’s long overdue.

Al Goldman’s the chief market strategist at A.G. Edwards.

AL GOLDMAN: The good news today is that this dramatic sell-off in the market means that the correction is getting its dastardly deed done sooner rather than later.

The sell-off was across the board. Volume was extraordinary: more than 4 billion shares changed hands. All 30 Dow stocks were down on the day. The blue chips were off 546 points for one brief moment. Which was our cue to call David Johnson. Never a good thing on a day that’s not a Friday. Mr. Johnson, quite an afternoon.

DAVID JOHNSON: You know, actually, a remarkable day. And the . . . you know, we knew to be on our toes because you could see this coming. There was that big sell-off in China. And then there was a big sell-off in Europe. And then there was a fairly big sell-off here. We thought we’d kinda dodged the bullet but boy, that last hour was a killer.

RYSSDAL: Well, what happened? I mean, you know, I stepped away from my desk, came back and we were down 300 more points.

JOHNSON: Yeah, I know. And it happened to all of us. It literally was that quick. Right at, I guess 3 o’clock Eastern, 2 o’clock my time, noon your time. There was a drop of over 250 points in the Dow Industrial’s average. And your knee-jerk is to say, you know, some stupid clerk sold a million shares and only should have sold a thousand, and the computers did it or whatever. Now what we’re understanding is that it may well have been that the Dow — because of a miscalculation, maybe a computer error, software error — was understating the magnitude of the sell-off for some period of time. And so that it really, instead of down 260, we might have been down 310, and then a little later down 350 and then . . . But what happened is they switched computers, and it all caught up at once and . . . gee, I wish they’d never caught up. It was ugly.

RYSSDAL: Yeah, right. Talk to me for a second about fundamentals. You and I have talked for months about how people are looking for reasons to buy out there. They found reasons to sell today. Is there something that’s making them think that maybe stuff’s not as good as it seems?

JOHNSON: Well, there was just a lot of things sort of coming together all at once. You still . . . we still have those Greenspan words sort of echoing in our ears from now, 36 hours ago, when he made this speech and mentioned the possibility of a recession. And there’s a lot of buzz about sub-prime lenders and how much money they’re losing. And a China contagion that causes sell-offs in, you know, Brazil and Russia and India and across the board. But it had been — and you and I talked to this . . . jillion times here, two and a half through almost three years since we’d had a 2 percent correction in one day — and you expect, you expect a half a dozen of those a year. So here’s the one that maybe will last for several months.

RYSSDAL: Yeah. Very quickly now, are we looking at another week, week and a half of sort of unsteadiness before this thing settles out?

JOHNSON: I can’t . . . you know, I really can’t look beyond that. I . . . you know, I would be amazed if there weren’t some sell orders that hit these markets early in the morning. Then let’s just kinda see how they handle them. It may well be that the buyers, you know, see that we’re having a sale and they come rushing back in again.

RYSSDAL: All right, we’ll see what happens. David Johnson down in Dallas. Thank you, David.

JOHNSON: We will survive.

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