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Democratic presidential contender Barack Obama says his economic plan would offer a tax break to 95% of working Americans.

John McCain, the Republican nominee, has another name for his rival’s plan: government giveaway.

The presidential campaigns are clashing over whether Obama’s tax proposal, which would expand the ranks of those who pay no federal income tax but get a refund check, is akin to welfare.

Obama’s opponents, calling the proposal another step in his plan to redistribute wealth, are particularly angered that he would pay for the cuts by raising taxes on those earning more than $250,000.

"Barack Obama’s plan to raise taxes on some in order to give checks to others is not a tax cut; it’s just another government giveaway," McCain said at a New Hampshire rally on Oct. 22.

Obama supporters, however, say that those who would receive the tax breaks do support the government. All the refundable credits have either a work or community service requirement, his advisers say.

"These pay people taxes - payroll taxes, gas taxes, property taxes, sales taxes, airline taxes and many others," said Austan Goolsbee, Obama’s senior economic adviser. "They are workers. It is completely offensive to say giving them a tax cut on income taxes is welfare."

At issue is Obama’s plan to greatly increase the number of refundable tax credits available to workers, students and homeowners. By making the credits refundable, those who owe no income tax would get money back from the federal government.

The Democratic nominee’s "making work pay" credit alone would give $500 to single filers earning less than $75,000 and $1,000 for couples making double that. It will eliminate the federal tax liability for 10 million low-income Americans, according to the campaign.

Obama’s other proposals - including expanding the refundable earned income tax credit and making the Child and Dependent Care Tax Credit refundable - would relieve another five million people of their income tax burden, experts said.

The number of people who don’t pay federal income tax has grown over the past two decades as the government has added tax incentives for college students, families with children and those saving for retirement, to name a few. Some 47 million filers, or 33%, don’t pay taxes, according to the Tax Foundation.

That number would grow by 16 million under the Obama plan, so 44% of filers would have no liability, the group said. Enacting the credits would cost the government more than $1.2 trillion in revenue over 10 years, according to the non-partisan Tax Policy Center.

McCain, for his part, is also proposing a new refundable tax credit that would take 15 million people off the tax rolls, according to the Tax Foundation loan until payday. His credit could only be used to cover the cost of health insurance premiums. His campaign says it wouldn’t cost the government anything.

Overall, Obama’s tax package would cost $2.9 trillion, while all of McCain’s tax proposals would cost $4.2 trillion, according to the Tax Policy Center.

The Republicans oppose sending money without restrictions on its use to people who don’t pay tax, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser. And the GOP doesn’t like paying for it by increasing taxes on wealthier Americans, which they say is another example of Obama’s ideological drive to redistribute wealth, he said.

"It’s pretty clear what’s going on here," Holtz-Eakin said.

Also, simply giving lower-income people tax refunds is not the best way to help them or the economy, said Bill Beach, director of the Center for Data Analysis for the Heritage Foundation, a conservative think-tank.

"They want jobs and higher wages," he said. "They don’t want checks."

For the most part, the government enacts tax credits to encourage certain behavior. For instance, the Saver’s Credit is designed to give low-income workers incentives to fund retirement accounts.

Making tax credits refundable allows lower-income workers to take advantage of them, said Robert Greenstein, executive director of the left-leaning Center on Budget and Policy Priorities. Since many lower-income workers pay little or no tax, a non-refundable credit such as the Saver’s Credit isn’t much use to them. Obama wants to make the Saver’s Credit refundable.

"If you are a millionaire, you get the child care tax credit," he said. "But if you make $20,000, you are denied it because you don’t make enough. It ends up going to the least needy."

Obama supporters also take issue with the Republican view that the refundable credits would go to people who pay no tax. Those who don’t pay income taxes still support their state and federal governments through payroll taxes for Social Security and Medicare, sales taxes, property taxes and gas taxes.

"Most people pay more in Social Security taxes than in income taxes," said John Irons, research and policy director at the liberal Economic Policy Institute. 

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Exxon Mobil Corp. set a quarterly profit record for a U.S. company Thursday, surging past analyst estimates.

Exxon Mobil (XOM, Fortune 500), the leading U.S. oil company, said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier. That profit included $1.45 billion in special items.

The company’s prior record was $11.68 billion in the second quarter of 2008.

The latest quarter’s net income equaled $1,865.69 per second, nearly $400 a second more than the prior mark.

The company said its revenue totaled $137.7 billion in the third quarter.

Analysts had expected Exxon to report a 40% jump in earnings to $2.38 per share, or net income of $12.2 billion, and a 28% surge in revenue to $131.13 billion, according to a consensus of estimates compiled by Thomson Reuters.

The company’s earnings were buoyed by oil prices, which reached record highs in the quarter before declining. Oil prices were trading at $140.97 a barrel at the beginning of the third quarter, and had fallen to $100.64 at the end.

Compare that to 2007, when prices traded at $71.09 a barrel at the beginning of the third quarter, and rose to $81.66 by the end.

Exxon’s special charges include the gain of $1.62 billion from the sale of a German natural gas company. It also includes the $170 million charge in interest related to punitive damages from the Valdez oil spill off the Alaskan coast in 1989.

The Irving, Texas-based company said it lost $50 million, before taxes, in oil revenue because of Hurricanes Gustav and Ike. The company expects damages related to these hurricanes to reduce fourth-quarter earnings by $500 million.

Exxon’s stock price slipped by about 2% in afternoon trading. Bernie McGinn, Chief Executive of McGinn Investment Management and owner of 30,000 Exxon shares, said he wasn’t surprised, given the recent downturn in oil prices.

"That’s probably the last of the big profit quarters, at least for now," said McGinn. "You can’t make the case that it’s going to continue."

Despite the surge in profit, Exxon said oil production was down 8% in the third quarter, compared to the same period last year freecreditreports.

The company also said it is spending more money to locate new sources of oil. Exxon said it spent $6.9 billion on oil exploration in the third quarter, a jump of 26% from the same period last year. The company said it began a new program to tap natural gas offshore from Nigeria.

Exxon also has an aggressive program for buying back stock, with 109 million of its shares repurchased during the third quarter, at a cost of $8.7 billion.

In a conference call with analysts, David Rosenthal, vice president of investor relations for Exxon, said the company’s "first priority" is using profits to continue investing in exploration programs for oil and other resources.

Rosenthal said the company would also consider using new-found funds to bolster its dividend, buy back more shares and to purchase other companies, but he declined to offer specific details.

Phil Weiss, analyst for Argus Research, said he doesn’t expect Exxon to break any more profit records in future quarters.

"I don’t expect the fourth quarter to be nearly as good as the third because of lower oil prices," said Weiss.

Analysts also said that demand for gasoline is falling, which could impact Exxon and other oil companies.

"While oil companies benefit from high oil prices in the short run, they might lose in the long run," Anas Alhajji, chief economist for NGP Energy Capital Management, wrote in an email to CNNMoney.com. "Higher oil prices lead to lower demand, as we have seen in recent months."

Earlier Thursday, Europe’s leading oil company, Royal Dutch Shell PLC (RDSA), reported a 22% gain in net profit for the third quarter, to $8.45 billion. The company said sales rose 45% to $132 billion.

Exxon is the second-largest company in the Fortune 500 in terms of annual sales, behind Wal-Mart Stores (WMT, Fortune 500).

Exxon’s stock price has fallen about 20% so far this year, compared to the S&P 500, which has fallen about 36%. 

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The price of oil settled at its lowest level since May 29, 2007 Monday as investors worried that the global economy may not be able to sustain demand for fuel as world markets tumbled.

U.S. crude for December delivery ended the day down 93 cents to to $63.22 a barrel in New York.

The price of oil on Monday was closely following the performance of stocks.

"I think you could overlay an S&P (500 index) map with a crude (oil) map, and you’d have trouble telling which is which," said James Cordier, founder of commodities brokerage Optionsellers.com.

World markets: Investors sold off crude futures as stock indexes around the world fell.

Japan’s Nikkei index closed down 6.4% Monday, its lowest close in 26 years. Markets in Hong Kong and Europe also plummeted.

In the U.S., the Dow Jones industrial average fell 3.6% Friday, and had fallen an additional 0.2% as oil floor trading ended.

Earlier during the session, U.S. stocks had rallied 200 points after an unexpected boost in September housing sales, news that regional banks would be receiving $18 billion in federal funds, and a big third quarter for Dow component Verizon (VZ, Fortune 500), the nation’s second-largest telecom company.

Oil prices rose as high as $65.60 during Monday trading - in tandem with a morning Dow rally - but mounting concern about a global recession and its impact on crude consumption sent prices falling again.

Falling demand: Last Friday, concern about demand drove down oil prices despite a pledge by the Organization of Petroleum Exporting Countries to cut production by 1.5 million barrels a day.

Falling demand for petroleum-based fuels in the current economic climate has driven oil prices down more than 57% since hitting a record high of $147.27 in July.

The retail price of gasoline in the U.S. has also fallen. Retail gas prices averaged $2 one hour loan.668 a gallon overnight Monday, according to a daily survey from motorist group AAA. Prices peaked at $4.114 a gallon in July.

According to the Department of Transportation, Americans have been seriously cutting back on their driving habits.

American drivers reduced the number of miles they drove by 5.6%, or 15 billion miles, during the month of August compared to the same month last year, according to a report released Friday. That was the largest monthly drop in miles traveled since the department began reporting data in 1942.

But even if stocks recover, oil prices may not rise significantly any time soon, since consumers and businesses have already started cutting back on oil use, said Cordier.

"A certain amount of demand destruction has already taken place, and it’s going to take a while to get it back," he said. "You’ve got to blow the mothballs off the jet that’s over there in the desert."

OPEC production: The fall in fuel demand, coupled with the decline in market confidence outweighed a decision by OPEC, an association of oil producing nations that account for about 40% of the world’s oil supply, to cut production levels by 1.5 million barrels a day.

The trade cartel has expressed concern that the record high crude prices in July, and the subsequent economic downturn, may have permanently impaired demand for oil.

"I think they needed to do something, and take some course of action," said Tom Orr, head of research for trading firm Weeden & Co in Connecticut. If prices fall near $50 a barrel, "I think they will cut more … they have to," he added.

Several OPEC members, including Iran and Venezuela, rely heavily on oil revenue to support their local economies. 

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Retiree Murray Soupcoff used to be an active investor, checking stock markets all day and making frequent changes to his portfolio.

Today, he’s weaning himself from the business news and trying to relieve the stress of an evaporating retirement fund.

Yesterday morning, he woke up to hear that the Asian and European stock markets had plunged.

He didn’t look at the Toronto Stock Exchange until noon, when he found it was down only 200 points. This was good news, in his view. (The index closed down 37 points after dropping almost 700 points at the opening.)

"It’s hard not to pay attention," he says.

Twice a day, he practises transcendental meditation for 20 to 25 minutes at a time.

"Meditating keeps me calm," he says.

"When you’re feeling fear, the primitive side of the brain – the fight-or-flight reflex – is activated. I’m trying to get back to the rational side."

Whether doing yoga, taking walks or tuning out the media, investors have different ways of staying composed during one of the worst weeks ever for stock market volatility.

I talked to a few people who are living on their investments after leaving the world of work. They say it can be hard to watch the market turmoil.

Soupcoff was ahead of the curve. He sold many profitable investments last spring and put the money into a high-interest savings account.

"I was worried, but I never imagined things would be this bad. I made the mistake of going back into the market from time to time, so I didn’t do as well as I should have."

He now holds mainly dividend-paying blue-chip stocks and income trusts. These are a consolation in a terrible market.

"At least, you’re being paid to wait," he tells me.

But income trusts, which distribute high yields to investors without paying tax, are a temporary haven. By January 2011, they will be taxed as if they were corporations.

Soupcoff owns income trusts that have cut distributions (such as Arc Energy Trust) or have announced plans to cut distributions (such as CI Financial Income Fund).

He’s not checking his portfolio value until markets improve.

"If I looked, I’d probably panic and sell it all out," he says. "I’m 65 and there’s only so long I can wait."

DAVE JENNINGS is on a long-term disability pension. He stays in bed all day, watching business news on a large TV that is attached to his computer.

He’s still an active investor, shopping for bargains and willing to pounce on stocks that look beaten up.

"We just put more money, about $12,000, into the market on Monday," he says.

Jennings is 46 and his wife Charlene is 42. They have about $500,000 in retirement savings, plus an education savings plan for their 13-year-old daughter.

"We’re down about $50,000 since this correction started," he says, adding that he checks his portfolio value every day on his computer internet pay day loan.

How did he escape with a 10 per cent decline when the Toronto stock market is down about 35 per cent this year?

"It’s thanks to Jim Flaherty," he says about the federal finance minister’s surprise announcement about income trusts.

Shaken by what he felt was breach of trust, he sold $200,000 worth of income trusts in 2006 and put the money into guaranteed investment certificates. Today, he’s excited to find bargains – high-quality stocks selling at lower prices than they have in five years.

He’s still putting money into the market, often adding to positions he holds and averaging down the costs. On Monday, he bought Bell Aliant (an income trust for Bell’s Atlantic phone services) and an exchange-traded fund that holds real estate investment trusts (stock symbol XRE).

"At our age, we should be 60 per cent in stocks and we are," he says.

With a paid-off house, he uses a home equity loan to invest.

"We buy on the dips and look for great value. What else are you going to do? Sit and hide?"

With 20 years to go until he has to start liquidating his investments, he thinks he’ll be all right. The current chaos won’t last forever.

Both Soupcoff and Jennings, who invest online with a discount brokerage account, like the "Pay Daddy" strategy of business TV personality Kevin O’Leary.

The idea is that if you invest your money in a tough market, you should get a high-yielding income stream as compensation.

LLOYD DAVIDSON, a 71-year-old retired computer engineer, is taking money out of his retirement savings account. But he’s not worried by the market drop.

"When I started my first RRSP in 1975, I decided never to put any money at risk," he says.

"I hold only GICs and I shop the market for the highest rate. I’m getting 5 per cent now, which is two points better than the posted rate.

"I never lose a moment’s sleep and I advise my kids to invest in GICs."

Many commentators say you shouldn’t hold all your money in GICs. They warn that you will lose your purchasing power to inflation and taxes in retirement.

Davidson’s response is articulate and carefully thought out. "Don’t believe the investment managers that make a profit when you buy and sell something," he says.

"When you’re thinking of making an investment and you could get a better return, think about this: Could it could change your life?"

For him, it’s no big deal to accept 5 per cent on GICs instead of 7 per cent on stocks. Two percentage points is not enough to make him take more risk with his money.

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Despite the weak economy and shaky credit markets, Ballpark Village is still moving forward, Cardinals President Bill DeWitt III told the St. Louis Council of Construction Consumers Thursday.

Site work on the $320 million first phase of the long-awaited project will begin early next year, and the Cardinals and co-developer Cordish Co. are seeking approval for a $100 million tax increment financing bond to be issued in March. Once that happens, construction will start in earnest, DeWitt said.

"We’re moving down the path," he said. "We’re committed to the project."

DeWitt acknowledged that the volatile credit market had raised some questions about Ballpark Village. But he said he was confident that bond markets will improve by March.

"We remain very optimistic," he said. "If some semblance of normalcy comes to the market and the range of volatility in the bond markets, we’ll be in great shape free credit report .com."

The Cardinals and Cordish are due to present a site plan Nov. 6 to the Missouri Downtown Economic Stimulus Authority, one of several agencies that must approve public funding for the project. They designed a new site plan after deciding to put off condominiums until phase two because of the weak housing market.

DeWitt gave a preview to the council, showing off the 20-story office building and entertainment district he hopes to build just north of Busch Stadium. The developers have lease agreements on 80 percent of the space in the first phase of Ballpark Village, contingent on March’s bond sale, he said.

tlogan@post-dispatch.com | 314-340-8291

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The number of states suffering monthly job losses more than doubled in September, with Michigan losing the greatest number of jobs, according to a government report released Tuesday.

Private sector and government jobs fell in 41 states and the District of Columbia last month, the Labor Department said. By comparison, only 18 states reported monthly job losses in August.

The widespread job losses are a sign of a recession, said Bob Brusca, an economist at Fact and Opinion Economics in New York.

"You expect to see job losses across the board, across the country," Brusca said.

The numbers released Tuesday underline the grim condition of the nation’s job market.

Earlier this month, the Labor Department reported that net payrolls nationwide declined by 159,000 in September, the ninth straight month the U.S. economy has lost jobs. The unemployment rate remained unchanged from the prior month at 6.1%.

Eleven states reported jobless rates higher than the national average. Rhode Island posted the highest at 8.8%, an increase from 8.5% in August. Michigan had the second highest rate, 8.7%, which fell from 8.9% the month before.

Michigan lost 28,300 jobs in September and has lost 77,900 jobs in the past year guaranteed approval cash advance loans. Georgia lost the second greatest number of jobs - 22,300 - down 61,100 over the past year. Louisiana shed 17,500 jobs in September, a figure not ’substantially’ affected by Hurricane Ike, according to the report.

Michigan, home to the country’s auto industry, has reported job losses as auto manufacturing plants close and automakers discuss mergers. Just last week, General Motors (GM, Fortune 500) announced that it would close a metal stamping plant near Grand Rapids, Mich., by the end of next year, costing about 1,340 hourly jobs.

Brusca said it’s not surprising that Midwestern states have shed a high number of jobs.

"The Midwest has been having more trouble with jobs, that’s where manufacturing industries are concentrated," Brusca said. "With the treacherous situation with the auto industry, it’d be surprising if they didn’t report job loses," he said.

Nine states posted job gains. Missouri, the state reporting the largest monthly increase in employment, added 3,800 jobs. It was followed by Nebraska, Wyoming, West Virginia and Virginia. 

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Stocks surged Monday, with the Dow jumping back above the 9,000 level, as investors welcomed talk of a second economic stimulus plan and an improvement in key lending rates.

The Dow Jones industrial average (INDU) added 413 points, putting it at No. 8 on the list of all-time biggest one-session point gains. The advance of 4.7% did not make the top 10.

The Standard & Poor’s 500 (SPX) index gained 4.8% and the Nasdaq composite (COMP) added 3.4%.

After the close, American Express (AXP, Fortune 500) reported weaker quarterly profit as cardholders cut back spending and had more problems repaying debt. However, the results were better than expected and shares inched higher in extended-hours trading. (Full story)

Texas Instruments (TXN, Fortune 500) also reported weaker third-quarter profit after the close Monday and forecast fourth-quarter revenue would fall sharply, missing estimates. The chipmaker also said it is looking to sell part of its wireless operations.

Tuesday morning brings profit reports from Dow components 3M (MMM, Fortune 500), Caterpillar (CAT, Fortune 500), DuPont (DD, Fortune 500) and Pfizer (PFE, Fortune 500). Other companies scheduled to report include troubled bank National City (NCC, Fortune 500).

Investors cheered comments from Federal Reserve Chairman Ben Bernanke Monday that suggested a second economic stimulus package could be up for discussion. Additionally, comments from Treasury Secretary Henry Paulson and an improvement in lending rates added heft to bets that the credit market freeze is starting to thaw.

But the volatility of recent weeks isn’t over, analysts said. Monday’s gains reflected the need for traders to take a break from last week’s wild swings, if nothing else, said Dean Barber, president at Barber Financial Group.

He said that the huge Dow swings last week of sometimes 1,000 or more points in a single session - between the highs and the lows - have really worn people out.

"I think there’s a sense that the selling has gotten overdone, so you’re seeing an advance today," Barber said.

"But people shouldn’t think that means that we’re moving up from here on out," he said. "I think we’re still in for a rough ride going forward."

In testimony before the House Budget Committee, Bernanke noted that "with the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate."

The Bush administration said it was open to the idea. Congressional Democrats have previously said a second stimulus package is needed.

Shortly after Bernanke’s speech, Treasury Secretary Henry Paulson gave a statement that a "broad group of banks" is interested in participating in the government’s plan to invest $250 billion directly into lending institutions. Paulson also reiterated that the investments should eventually earn a good return for taxpayers.

These announcements helped propel Wall Street. But on a broader level, stocks were up because investors were starting to express optimism, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.

He said investors were encouraged by a weekend cover story from financial weekly Barron’s that suggested that the recession won’t drag on as long as feared. However, the main factor restoring confidence was an improvement in lending rates over the past week, he said.

"The credit market is the most important thing right now," he said. "We need to see the banks lending to each other again."

He added that the recent drop in Libor, a key bank lending rate, on both an overnight and 3-month level, was critical: "We’re seeing that the government’s efforts are starting to work," Rovelli said.

The morning brought an improved report on the economy as well. The September index of leading economic indicators (LEI) rose 0.3% after falling a revised 0.9% in the previous month. Economists surveyed by Briefing.com thought LEI would fall 0.1%. (Full story)

Stocks slipped Friday at the end of a volatile week as recession fears were countered by Google’s earnings and bullish comments from influential billionaire Warren Buffett payday advances.

But Wall Street managed to post gains for the week, which included the Dow’s biggest one-day point gain ever and the second-biggest point loss ever. For the week, the Dow and S&P 500 both added 4.7% and the Nasdaq added 3.6%.

Credit market: Lending rates improved Monday, building on last week’s recovery, as the global initiatives undertaken continued to have an impact.

The South Korean and Dutch governments have now joined the list of nations trying to stem the global financial crisis by making billions in capital available to banks. Several key lending measures reacted, with shorter-term

Libor, the overnight bank-to-bank lending rate, falling to 1.51% from 1.67% late Friday, according to Bloomberg.com, a more than four-year low. The 3-month Libor, what banks charge each other to borrow for three months, fell to 4.06% from 4.42% Friday.

Another indicator, the Libor-OIS spread, a measure of cash scarcity, fell to 2.93% from 3.28% Friday.

The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed to 2.97% from 3.63% Friday. The spread hit a record 4.65% earlier this month. The wider the spread, the more reluctant banks are to lend to each other.

Treasury prices rallied, lowering the yield on the 10-year note to 3.84% from 3.92% late Friday. Treasury prices and yields move in opposite directions.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, rose to 1.07% from 0.80% late Friday as investors began to pull money out of the safer investment and put it back in stocks. Last month, the yield on the 3-month bill skidded to a 68-year low around 0%.

Company news: AIG (AIG, Fortune 500) said it will start selling off pieces of its business by the end of the year. The troubled insurer also said it expects to be able to repay the $85 billion bridge loan it got from the government last month after it nearly collapsed. AIG shares gained 10%. (Full story)

Ericsson (ERIC) reported weaker profit and higher revenue versus a year earlier, both of which topped estimates. Shares of the telecom gear maker rallied 15.7%.

Halliburton (HAL, Fortune 500) said it swung to a net loss in the third quartet on debt charges and the impact of a tough hurricane season. However without one-time items, the oilfield services provider reported a profit that was higher than what analysts were expecting. The stock gained nearly 14% and gave a lift to other oil services companies.

Yahoo (YHOO, Fortune 500) slipped modesty after the Wall Street Journal said the company could announce layoffs and other cost-cutting measures Tuesday when it releases quarterly results.

Declines were broad based, with all 30 Dow stocks rallying, led by oil services firms Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500). The oil stocks jumped in tandem with oil prices.

Market breadth was positive. On the New York Stock Exchange, winners topped losers five to one on volume of 1.23 billion shares. On the Nasdaq, advancers topped decliners by more than three to one on volume of 2.07 billion shares.

Other markets: U.S. light crude oil for November delivery rose $2.40 to settle at $74.25 a barrel on the New York Mercantile Exchange after hitting a 13-month low last week.

Bets that demand is slowing have sent oil prices lower since crude hit an all-time high of $147.27 a barrel on July 11. So far, instead of providing relief to investors, the decline has been seen as another indication of the global economic slowdown.

Gasoline prices fell another 3.1 cents overnight, to a national average of $2.923 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 33rd consecutive day that prices have decreased - in the past month alone, they’re down more than 93 cents a gallon.

COMEX gold for December delivery rose $2.30 to settle at $790 an ounce.

In currency trading, the dollar rose against the euro and the yen. 

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Extreme volatility is what makes amusement park thrill rides fun, but it isn’t very much fun for investors.

Sales of antacids probably spiked over the last month as investors took shots in rapid order while they watched almost-daily triple-digit swings on the Dow Jones industrial average. In the last week alone, the market recorded two of its largest single-day point changes on record. On Wednesday, the Dow dropped 733 points, its second-largest one-day point loss ever. The drop wiped out most of the Dow’s historic 936-point gain on Monday.

On Thursday, the Dow finished up 401 points, which seems relatively mild compared with the previous days’ gyrations. But within that day’s trading period, the index changed directions 75 times. The rapid movement of the market was reflected in the Chicago Board Options Exchange volatility index, known as the VIX, which on Thursday rose to an all-time intraday high of 81.17, its first-ever move over 80. The VIX, which usually trades below 50, tracks options activity for the companies that make up the S&P 500.

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 GRAPH: Stocks chart

"I’m getting a little dizzy here," Concord investment adviser Jim Weiss said after Thursday’s close. "There have been savage emotions in the market."

For much of the last month, the markets have been driven by fear: first, fear the United States had no plan to rescue the banks, and then, after the decision to invest $250 billion in U.S. banks, fear that the cash injection wouldn’t be enough to get credit flowing again. The biggest fear is that the financial crisis could mean a prolonged recession with heavy job losses.

"Restoring order to the credit market is crucial, because credit is the fuel that feeds our economic engine," said economist Donald Klepper-Smith, research director at DataCore Partners in New Haven, Conn., and Martha’s Vineyard. "The crisis in the financial markets is really a crisis of confidence — business confidence, consumer confidence, and investor confidence."

There have been some signs that investors are trying to check their emotions and refocus on economic data.

"We’re getting a lot of data, and the market is trying to sort it out," said Weiss, who is president of the money management firm Weiss Capital Management. "The level of confusion, uncertainty, and panic is close to unprecedented. The market’s time horizon, which normally looks six to nine months out, has been reduced to about 36 hours."

Cornelius Hurley, director of Boston University’s Morin Center for Banking and Financial Law, said volatility in the market has been a natural reaction to the uncertainties in the economic landscape.

The cash infusion into banks is only the first step in what Hurley called a painful "de-leveraging," a process of repricing hundreds of billions of dollars in overinflated assets, from tract houses to bank portfolios, to their new value. The jitters likely will continue until it is complete, said Hurley, a former assistant general counsel to the Federal Reserve Board of Governors.

In a keynote address to Harvard Business School’s Centennial Global Business Summit last week, Lawrence H. Summers, former U.S, Treasury secretary and Harvard University president, described "a vortex of five vicious cycles" threatening the economy, some of which already are being seen.

One trend that already has occurred is falling stock prices, which prompt investors to sell stock, pushing prices even lower cash advance loan no fax. Another is bank portfolios losing value, leaving banks with less capital to lend and causing them to lose more value. Still another is slowing economic activity weakens the financial system, constricting lending and further weakening the economy.

Most alarming is the prospect for a "Keynesian" cycle, named for the British economist John Maynard Keynes, in which less spending leads to job losses, leading in turn to lower incomes and still less spending; and a potential "panic" cycle, in which depositors rush to withdraw money from troubled banks, putting them in more trouble and causing more withdrawals.

"These five vicious cycles have created a situation unlike anything most of us have ever seen," Summers said.

Some of the dynamics Summers cited showed up in the deepest point drops of the last few weeks, particularly when hedge funds unloaded large volumes of stock in response to "redemption notices" from nervous investors. In some cases, automated computer programs generated those transactions.

This "forced selling" is a new factor in the market, but one that may persist until capital flows have resumed and the housing market has bottomed out, warned James T. Swanson, chief investment strategist for Boston mutual funds company MFS Investment Management. "The market won’t know how to behave until you see some stability in housing, because that’s the root of the problem."

Many analysts expect the stock market’s ups and downs will continue.

"We’re going to continue to see volatility. You’re not going to see 50-point ranges, you’re going to see two-three-four hundred point ranges," said Woody Dorsey, president of Market Semiotics, a financial forecasting firm in Castleton, Vt.

Jim Ferrare, senior portfolio manager at Pinnacle Associates in Red Bank, N.J., said the changes that will result from government actions around the world to revive the credit markets will take some time to emerge, letting uncertainty linger on Wall Street.

"Volatility is here for a while, but more importantly, the change is not an overnight change," he said, referring to the government’s steps to restore normal levels of lending.

Financial advisers say such volatility is testing investors’ ability to, if not stand pat, avoid making rash moves — not just out of the market, but back in again, as well.

TrimTabs Investment Research reports that as of mid-October, investors had withdrawn $55.6 billion from equity funds. That compares with the $94.48 billion added in all of 2007.

Investment advisers say that while the stock market may seem like a maelstrom of uncertainty right now, investors who have proper plans can take advantage of the situation.

"This is a horrific market. But if you’ve already made a mistake, don’t sit on the sidelines and compound the mistake," said Dan Yu, a certified financial planner at Eisner LLP’s Personal Wealth Advisors group.

Yu and many other financial planners stress that long-term investors should do all they can to avoid making panic decisions and that those who do get out should return to the market incrementally. Putting money back into the market in chunks, rather than all at once, can help investors avoid that sick feeling of seeing the market fall sharply the day after they reinvest.

Ron Florance, director of asset allocation and strategy for Wells Fargo Private Bank, said investors too often fail to think about their long-term goals and let opportunity pass them by.

"Allowing the hysteria to drive your investment strategy is just a disaster in the making," he said. "Right now, changing your strategy is not a good idea."

THE ASSOCIATED PRESS CONTRIBUTED

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The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems, maintain growth and protect the poor against the financial turmoil roiling international markets.

The head of the bank’s policy-setting committee, Mexican Finance Minister Agustin Carstens, and World Bank President Robert Zoellick announced the commitment at the end of a daylong meeting.

Zoellick said the financial crisis "has been a manmade catastrophe. The actions and responses to overcome it lie in our hands."

He said that as the current crisis has unfolded, people in the United States and Europe reacted first with confusion, then anger, then fear. "Those natural reactions will spread around the world as the impact spreads," Zoellick said. "We need to take them seriously."

He said any prolonged tightening of credit or a sustained global slowdown could cause serious setbacks to developing countries’ efforts to improve the lives of their populations.

Such countries are already struggling with high prices for energy and food. "The poorest and must vulnerable groups risk the most serious — and in some cases, permanent — damage," Zoellick said best payday advance. "One hundred million people have already been driven into poverty this year and that number will grow."

Zoellick said the financial crisis underscored the need to modernize markets for a new global economy.

He said the bank and its sister institution, the International Monetary Fund, must ensure that as developed governments turn their attention to domestic matters they do not step back from their commitment to provide billions in aid to poor countries.

"Aid flows must be maintained," Zoellick said. "Today’s meeting of ministers was unanimous in that regard."

Carstens said ministers were unanimous in their view "that the World Bank had to protect the poor and vulnerable in the context of the global financial crisis." He said the Bank needs to be flexible to address the differing problems faced by poor countries and those with rapidly growing economies. 

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Buy on the sound of cannons.

– Rothschild family investing maxim

Some of us might be tempted by the bargains emerging in the incredible shrinking stock market. But we’re waiting to exhale.

Since last fall, when the looming global credit crisis first began to command the attention of the powers that be, the worldwide emergency crew of central bankers, finance ministers and regulators have, with mounting aggressiveness and creativity, experimented with a succession of more drastic rescue measures. So far, none have restored the investor confidence needed to arrest the downward spiral in stock values.

This week began for me with a call from an investment banker acquaintance urging me to join with his peers in "going to cash." By which he didn’t mean GICs. He meant taking enough cash out of the bank to cover expenses for a few months. If today’s plummeting share values go on much longer, "going to the mattresses" will no longer mean preparing for a war among the five families, as it did in The Godfather.

Yet, the global stock-market decline of nearly 40 per cent since June’s peak is typical of severe bear markets, from which patient investors stoic about their paper losses have subsequently done very well.

Just as bull markets always end, so do bears. And as an economist noted Thursday on PBS, "it’s rare that you see this level of pessimism at the outset of a market collapse. It’s more characteristic of the end."

Caution certainly is warranted. We’re still a ways from the previous Dow Jones industrial average nadir of 7,286 in October 2002. Conditions likely will worsen further before equity markets bottom out.

Investors already have been punished. I haven’t seen Canadian estimates yet, but Americans are suffering a paper loss of about $2 trillion (U.S.) in their retirement savings. And it’s tough to restore investor confidence when the news is dominated by the sudden disappearance of once-mighty U.S. financial institutions that controlled $11 trillion in assets.

Yet, it’s too bad the expression fundamentally sound lost its reassurance value at the time of Herbert Hoover. Because the real economy is sound. Canada created 87,000 new jobs in the first eight months of this year, and 1.5 million since 2002. The jobless rate of 6.1 per cent is modest by Canadian standards. An otherwise gloomy report by the International Monetary Fund last week said that with an estimated GDP growth rate of 1.2 per cent, Canada will outperform its G8 peers, while avoiding recession.

Corporate balance sheets worldwide, outside of the financial sector, are for the most part strong. Inflation and interest rates are historically low. These are unusual signs of vigour for a downturn.

The real problem is that stock markets are a slave to a global credit market in paralysis, a novel scenario in modern times. A U.S. capital markets observer last week said that "No one’s afraid to lend to Berkshire Hathaway or Microsoft. It’s only the financial companies they’re leery of, because no one knows the true value of the ‘assets’ on their books." Yet, while it may be the arcane world of high finance that’s gone haywire, not the broader economy, investors fret that eventually such recession-resistant firms as McDonald’s Corp. will run dry of funds to pay its meat-patty suppliers.

But the point at which the real economy is starved altogether for capital is far off, and likely won’t arrive. The orthodoxy-busting measures taken by world governments haven’t yet had time to kick in. And it’s manifestly evident that governments are prepared to do anything required to get credit markets functioning properly again, even if they have to convert post offices to state-run bank branches.

So, in these uncertain times, what to do about your stock portfolio?

• Think twice about selling, because that will just lock in losses that now exist only on paper. It is a good time to evict the dogs in your portfolio and take a 2008 tax loss.
• If you’re invested in battered blue chips, and bought them, as Warren Buffett has long advised, because they’re good companies worth owning forever, it’s probably best to hang on for the inevitable upturn. There’s no need to sell companies if they retain the solid balance sheets, consistent dividend payouts and dominant market-share position that drew you to them in the first place. These companies will emerge stronger from the downturn, if only for their ability to benefit from bargain-priced acquisitions and the shakeout among weaker rivals.
• Finally, should you engage in bargain-hunting, the last thing on the minds of today’s panic-stricken investors streaming for the exits? The answer is yes, if you believe, as I do, that this century will be the most prosperous in history. This century will be bereft of wealth-destroying world wars and will see developing-world economies – and not just China and India – striving for developed-world living standards. In what we once quaintly called the Third World, there will for decades be voracious demand for power plants, upgraded public-transit systems, the firefighting water bombers in which Bombardier Inc. has a global near-monopoly and the Waterloo, Ont.-designed BlackBerrys.

What to buy? The global food shortage that made headlines last summer hasn’t gone away. Yet, such agribusiness stars as Potash Corp., Agrium Inc., Deere & Co., Archer Daniels Midland Co. and Monsanto Co. are all trading at about half their five-year highs.

Infrastructure giants that build power plants, elevators, construction equipment and lighting systems, including General Electric Co., United Technologies Corp., Caterpillar Inc. and Siemens AG, are trading at a one-third to 50 per cent discount to their five-year highs.

And each pays a generous divided (6 per cent in the case of GE) to cushion the short-term blow even if these stocks have a bit further to fall before rebounding. Leading chemical producers share that distinction, including BASF AG, Dow Chemical Co. and E.I. du Pont de Nemours & Co.

Some of my favourite defensive stocks are also available at fire-sale prices:

Walgreen Co., the dominant U.S. drugstore chain (about 50 per cent off its 5-year high); Rona Inc. (down about 60 per cent, and takeover bait for Lowe’s Cos. or Home Depot Inc.); Big Pharma stocks Merck & Co. Inc. and Bristol-Myers Squibb Co., each trading at little more than half their 2003 price and boasting outsized dividends; and Cisco Systems Inc., the world’s best-run supplier of telecom and Internet gear trading 45 per cent below its five-year high.

"There are probably some great buying opportunities emerging in the stock market as a consequence of all this panic," economist Stephen Harper, whose day job is running Canada, said earlier this month. "When stock markets go down people end up passing on a lot of things that are underpriced."

Harper was excoriated, of course, for real or perceived insensitivity to those with paper and locked-in losses, retirees in particular, during the admittedly cruel market of the past several months. But on this point, at least, Harper’s empathy deficit doesn’t make him wrong.

David Olive writes on business and political issues. He can be reached at dolive@thestar.ca.

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