Tom Murphy
RedwoodAge.com

The Dow Jones Industrial Average lost 466 points last week - nearly half of that on Friday alone - stirring long-running fears about rising oil prices, the sinking economy and what it all means to boomers whose retirement portfolios are falling faster than their home values.

It's ugly. As bad as things were in March, they're worse as we head to end of the second quarter. Twenty-nine of the 30 major industrial companies in the storied Dow index lost ground on Friday, which speaks to the breadth of the despair felt on Wall Street.

Oil companies, airlines, carmakers, tech companies, drug makers, phone companies, banks all shared the pain. Coca-Cola was the lone gainer, but even it has fallen by 18 percent since January.

The financial sector spilled the most blood, and rightly so. After Citigroup's warning it will give up on trying to collect "significant" amounts of debt and Washington Mutual's announcement it will cut 1,200 more jobs, rumors swirled that Merrill Lynch may be poised to issue its own abysmal forecast. A Merrill spokeswoman issued a "no comment," and the big bank's stock lost 4.5 percent of its value  - roughly $1.5 billion - just like that.

It wasn't like there was shortage of bad news about the nation's financial institutions this week. Two former Bear Stearns execs were led off in handcuffs after allegedly misleading investors, another 400 mortgage bankers were charged with fraud by the feds, and Fifth Third Bancorp announced it needs to raise $2 billion to keep going - not exactly pocket change, even on Wall Street.

In other bad financial news, MBIA and Ambac, the nation's two largest insurers of bonds, lost their AAA rating from Moody's, which wasn't a shock because S&P and Fitch had already downgraded the companies.

"It's definitely an ugly end to the week," Stephen Carl, a principal at The Williams Capital Group, told the AP, with a degree of understatement. And he wasn't even talking about the oil prices, which are causing pain everywhere from the Big Three automakers to commuters trying to get to work.

Gas Pains
In Detroit, GM, Ford and Chrysler all got lower ratings from S&P, which suddenly discovered something the rest of us had suspected - high gas prices are hurting the sales of gas-guzzling American cars and trucks. The good news is that the roads are much less crowded at rush hour these days, given the high number of layoffs and the reticence to pay $4.50-$5.00 a gallon for gas.

OPEC is meeting this weekend to decide whether to allow more oil to go onto the market. The Saudis seemed to think they should sell more while prices are high, but the other ministers argue there's plenty of oil already on the market. The problem, they say, is the weak dollar, the sluggish US economy and those darned energy speculators, who keep bidding the price up because they believe it will keep going up.

Whatever the reasons, it's all bad news for boomers nursing a nest egg.  The Dow, which hadn't closed below 12,000 since St. Patty's Day, finished Friday down 220 points at 11,843. Just in case you were thinking of retiring soon, you might note that's 17 percent below its 52-week high of 14,279 on Oct. 11. It's also within spitting distance of the low of 11,509 on January 11.

Buy or Sell?
The meek might decide to dump their stock and run for the hills, and who would fault them? There's almost no good news in the market and no real reason to expect things to suddenly get much better, especially as much of Wall Street heads for some rest on the Jersey Shore (Europe is out this year, given the pathetic state of the dollar. A euro that cost 87 cents in 1999 now costs $1.56).

Others might remind investors about the sage advice of how to make money in the market: "Buy low. Sell high." The economy, as anemic as it is, has yet to formally enter a recession. At some point, the speculative oil bubble is likely to burst. And those banks have written off a lot of bad loans already, so how much worse can it get? Right?

Well, theoretically, the Dow could sink to zero, along with your hard-earned retirement savings. That would be bad, but it's also highly unlikely. Or the Dow could rebound and, with luck, head back into the 12's or 13's.

Most investors don't have the stomach to buy when the market is getting hammered, especially when the reasons are the same excuses they heard months ago. As Oaktree Asset Management Chief Investment Officer Robert Pavlik told MarketWatch.com: "Investors have been unwilling to step up and buy stocks because the markets continue to get pressured by the same old story."

And until that story ends, you may want to head for the beach, too.

Editor's Note: Tom Murphy hold investments that include companies listed in the Dow Jones Industrial Average.