Blue-Chip Stocks

Today’s lead story in The New York Times was titled, “Slump Humbling Blue-Chip Stocks, Once Dow’s Pride.” Some of the stocks listed at alarmingly low levels, as listed on the chart on page 16, are A.I.G. ($0.35), Citigroup ($1.02), General Motors ($1.86), Bank of America ($3.17) and General Electric ($6.66).

It strikes me that there’s a physical limit as to how much the federal government can support all these firms. It’s like the boy with a finger in the dyke; eventually, the forces of nature will take over.

Also, the approved funds will run out, and it will be very difficult to get Congress to approve an endless series of bailouts. Especially in the Senate, the Republicans will hang tough as a matter of ideology.

In the Times story, one expert said, “It borders on unbelievable.” But I don’t think so. When you keep increasing the federal debt, when consumers are spending more than they save, when credit cards are used to prop up the economy with increasing numbers of default, you don’t even need to anticipate a housing crisis to realize that collapse is on its way, if not imminent.

The stock prices are so bad that the New York State Stock Exchange had to suspend its minimum $1 per share requirement to prevent a series of delistings.

Where do we go from here? The most honest answer is that nobody knows. From what I’ve read, the rest of 2009 will be a lost year with the earliest possibility for growth in 2010.