Off to a great start .....  Wall St. is trying to tell him to stop the 
printing presses.  The best thing the government could do right now is 
nothing.....  


================================

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOYw.awwsNSg&refer=w
orldwide

U.S. Stocks Slide in Dow Average’s Worst Inauguration Day Drop 
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By Elizabeth Stanton

Jan. 20 (Bloomberg) -- U.S. stocks sank, sending the Dow Jones 
Industrial Average to its worst Inauguration Day decline, as speculation 
banks must raise more capital sent financial shares to an almost 14-year 
low. 

State Street Corp., the largest money manager for institutions, tumbled 
59 percent after unrealized bond losses almost doubled. Wells Fargo & 
Co. and Bank of America Corp. slumped more than 23 percent on an 
analysts prediction that they'll need to take steps to shore up their 
balance sheets. The Dow's 4 percent slide was the most on an 
Inauguration Day in the measure's 112-year history, according to data 
compiled by Bloomberg and the Stock Trader’s Almanac. 

All the banks are going to have to recapitalize, said Greg Woodard, 
portfolio strategist at Manning & Napier Advisors Inc., which manages 
$16 billion in Fairport, New York. “That's not done. That’s in front of 
them, and we don’t want to try to get in front of that trade.” 

The S&P 500 plunged 5.3 percent to 805.22. The S&P 500 Financials Index 
fell 17 percent to below its lowest closing level since March 1995 as 
concern European banks need more capital also weighed on the group. The 
Dow average slid 332.13 points to 7,949.09. Both the Dow and S&P 500 
retreated to two- month lows. 

The S&P 500 is off to its worst start to a year, shattering the biggest 
rally since World War II, as analysts cut earnings estimates by a record 
83 percentage points and companies signal worse to come. 

The S&P 500 is down 11 percent in the first 12 trading days of 2009, 
exceeding last year’s 9.2 percent drop, according to data compiled by 
Bloomberg going back to 1928. The decline helped erase more than two-
thirds of a 24 percent rally since Nov. 20 as optimism that government 
spending would revive the economy evaporated. 

Effectively Insolvent 

U.S. financial losses from the credit crisis may reach $3.6 trillion, 
according to New York University Professor Nouriel Roubini, who 
predicted last year’s economic and stock-market meltdowns. 

If that's true, it means the U.S. banking system is effectively 
insolvent because it starts with a capital of $1.4 trillion, Roubini 
said at a conference in Dubai today. This is a systemic banking crisis.

Europe's Dow Jones Stoxx 600 Index retreated 2.1 percent today, led by 
banks and technology companies. It fell almost 2 percent yesterday after 
Royal Bank of Scotland Group Plc forecast the biggest-ever loss by a 
U.K. company. The MSCI Asia Pacific Index retreated 2.1 percent today. 

Obama Sworn In 

Barack Obama became the 44th U.S. president today, inheriting the most 
severe economic crisis since Franklin D. Roosevelt was sworn in 76 years 
ago. The turmoil has dragged the world’s largest economies into 
recession, caused more than $1 trillion of losses at financial 
institutions and prompted a sell-off in global stock markets. 

Treasuries fell for a second day on speculation Obama will sell record 
amounts of debt to battle the recession. The dollar strengthened for a 
second day against the euro. 

State Street lost $21.46 to $14.89 for the biggest drop in the S&P 500 
and the stock’s steepest tumble since at least 1984. Unrealized losses 
on fixed-income investments rose to $6.3 billion at Dec. 31 from $3.3 
billion at Sept. 30, the company said. Unrealized losses on assets held 
in conduits increased to $3.6 billion from $2.2 billion. 

Bank of New York Mellon Corp., the world’s largest custodian of 
financial assets, fell 17 percent to $19, its lowest closing price since 
1997. 

Financials Tumble 

Financial companies posted the biggest drop among the S&P 500’s 10 main 
industry groups as all 81 shares fell. 

Wells Fargo, the largest bank on the U.S. West Coast, slid 24 percent to 
$14.23. Friedman Billings Ramsey Group Inc. analyst Paul Miller lowered 
his earnings estimates and price target, in addition to predicting a 
dividend cut. 

Bank of America, the biggest U.S. lender by assets, fell the most in the 
Dow average, sliding 29 percent to $5.10. FBR’s Miller estimated Bank of 
America needs at least $80 billion of additional capital. 

“You don’t want to be anywhere close to these common stocks because you 
don’t know how much new stock is going to be issued,” said Wayne 
Wilbanks, who oversees $1.1 billion as chief investment officer at 
Wilbanks Smith & Thomas in Norfolk, Virginia. “If one wants to invest in 
this space I would focus almost exclusively on the preferred shares,” he 
said, because that’s the same type of stock the government is 
purchasing. 

The U.S. government has taken preferred equity stakes in at least 257 
banks including Bank of America, Wells Fargo, Bank of New York and State 
Street since October under its Troubled Asset Relief Program aimed at 
stabilizing the banking system. 

Aggregator Bank 

Regions Financial Corp. fell 24 percent to an almost 24- year low of 
$4.60 after reporting a record fourth-quarter loss. JPMorgan Chase & Co. 
lost 21 percent to $18.09, the lowest since October 2002. 

Obama’s advisers are considering options for dealing with troubled 
assets still clogging banks’ balance sheets, according to people 
familiar with the matter. Among alternatives: setting up a government-
backed “bad” or “aggregator” bank to hold the securities, or leaving the 
assets on banks’ books and providing a government guarantee. 

Atmosphere of Cynicism 

“The risk of investing in financials remains relatively high,” said Alan 
Gayle, senior investment strategist at RidgeWorth Capital Management in 
Richmond, Virginia. “There’s an atmosphere of cynicism and disbelief 
with regard to a lot of these turnaround stories.” RidgeWorth manages 
$70 billion. 

Polo Ralph Lauren Corp. slid 9.4 percent to $37.25. Goldman Sachs 
advised selling the designer of the U.S. Olympics team’s official 
uniform as consumer spending shifts from “aspirational to 
desperational.” 

Alcoa Inc., the largest U.S. aluminum producer, sank 11 percent to 
$8.35. Aluminum declined for the seventh straight day in London on 
speculation that demand will weaken as the housing slump worsens. 

To contact the reporter on this story: Elizabeth Stanton in New York at 
estanton{at}bloomberg.net. 

Last Updated: January 20, 2009 16:47 EST 

CMPQwk 1.42-21 9999 
Progressive taxation is slavery for those who succeed .....

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