The markets took a pounding today to start off the new week, mostly at the hands of poor economic data and a strengthening United States Dollar.  The Dow Jones Industrial Average was down 187.13 for a loss of 2.13% to close at a level of 8,612.13.  The Nasdaq Composite and Standard and Poor’s 500 Index lost 42.42 and 22.49 respectively, losing 2.28% and 2.38% respectively to close at levels of 1,816.38 and 923.72.  The U.S. Dollar strengthened by over a percent and a half against the Euro and over two and a half percent against the Canadian Dollar.

The biggest piece of news for the day was the Obama administration and Treasury secretary Timothy Geithner announcing that Wednesday will be the day they unveil all of the details of their proposed financial overhaul.  Many investors are expecting new rules considering derivative contracts of all kinds, include the infamous $70 trillion dollar plus Credit Default Swap (CDS) market.  These are instruments used by investors to predict and hedge against the risk of default by any number of companies or governments, among many other purposes.  American International Group (AIG) [AIG: 1.53, -0.08 (-4.97%)] was one of the companies that fell victim to collateral problems in regards to credit default swaps.  The new regulations that investors expect Obama and Geithner to propose include regulating every facet of this market, from who can write derivative contracts, who can buy derivative contracts, how, when, and where they are traded, over what exchanges they are a traded, and how many contracts specific parties can own, which in turn is a direct regulation of leverage.  Most investors believe this is completely against free-market thought, but those on the left say that these regulations are necessary to help avoid problems like the current financial crisis.

In other news, Six Flags, Inc. [[SIXF.OB]] filed for bankruptcy today in an effort to reduce their debt by roughly 75%.  Some people within the company are hoping that after the Chapter 11 filing is complete that the company can emerge from bankruptcy within as little as 6 months.  These same executives also believe that Six Flags will not have to sell of any of its $3B in assets during the time it is under bankruptcy protection, which would be more than ideal for the company.  Those unsecured debt holders are more than likely to lose the entirety of their investment.

Thanks for joining us for the Market Recap, please check back tomorrow for Tuesday’s Market Recap.

- Charles W. Petredis

Disclosure: None.

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