Market Pros Find No Solace as Selloff Accelerates

Wall Street surely greeted Friday with a line from 1920s wit Dorothy Parker, asking "What fresh hell is this?" before another brutal session that saw the Dow Jones Industrial Average breach the 8,000 level in intraday trading.

Our pundits, too, were drawing on history for reference points, while President Bush's attempt at reassurance failed to soothe investors in the same manner as Franklin Roosevelt's first inaugural address in the grim days of March 1933, when he told Americans he would "assert my firm belief that the only thing we have to fear is fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance."

Ed Yardeni, founder of Yardeni Research and a frequent backer of the notion the economy had in the past been in the greatest global boom of all time, was left with a stark alternative Friday, when the Dow sagged more than 600 points at the open.

"During times like this, we can sink into despair or turn to uplifting poetry," he wrote, quoting a passage from Rudyard Kipling's "If," that, while it wasn't aimed at jittery investors, urged the stout of heart to "hold on when there is nothing in you/ Except the Will which says to them: 'Hold on.'" A T.S. Eliot allusion about the cruelest month followed. For the poet, it's April, but Yardeni observed that October usually holds that place.

"The flip side is that [October] often made major market bottoms followed by significant bull markets. In the last 10 bear markets since 1966, four bottoms occurred in October," he wrote.

A brief appearance by President Bush seemed to pour (slightly less expensive) gas on the fire. The Dow was down about 98 points at the outset of his 10:25 a.m. address, and fluctuated during the president's remarks.

"This has been a deeply unsettling period for the American people," Bush said. "Many of our citizens have serious concerns about their retirement accounts, their investments, and their economic well-being.

"Here's what the American people need to know: that the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively."

As he described the $700 billion bailout, plans to rescue mortgage holders in trouble, plans for meeting with the heads of the G7 economies, and the rehabilitation efforts of Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox and FDIC Chair Sheila Bair, the market slid anew.

"We all share a determination to solve this problem — and that is exactly what we're going to do," Bush said.

As he left the lectern a few minutes later, the Dow was down 218 points.

Ed Hyman, co-founder of ISI Group, which relies heavily on data surveys to make its forecasts, said the final quarter of the year was officially headed to recession. He dropped his GDP growth estimate from -1% to -4%. "Many credit markets remain frozen," Hyman wrote Friday. That paralysis prompted him to lower his forecast for the first three months of next year too, to -2% from -1%.

Merrill Lynch's chief investment strategist, Richard Bernstein, whose firm is among the most prominent casualties of the current crisis, sought a calmer tone amid the wild volatility.

"Volatility is always unsettling, and this cycle's financial market turmoil is particularly so," he wrote Friday. "It is important now for investors to remain objective. Capitalism, although clearly quite sick right now, will survive and will eventually again prosper. For now, investors should remain cautious, and we continue to emphasize defensive investments."