DOW off 440 points

[Andrew McCarrick]

DOW off 440 points; 7554... lowest in years.

[Alexis Hanawalt]

It'll settle around 10,000 in 2 - 4 years. Just like every bubble in history, adjusted for inflation, it'll land right where we would have been if there had been no bubble in the first place.

Count on it.

[Dominique Grenier]

That really sucks, we still need to make some purchases in the sates, and the exchange rate took a big hit. We already lost about $5000 CAD in the last six weeks because of this, and it is continuing. Talk about a bad timing...

[Michael Schrengohst]

Right after the election a long time client cut the production I was doing.
He layed off half of his staff and said his long term looked rather bleak.
Last week another client pulled the plug on some upcoming shoots.
This week I had two more clients say they were stopping all
advertising until they see how the Christmas season does.
Of course it's like cutting your own throat to not advertise
but most business's look at the outside contractors first before
they cut internally. A friend of mine used to haul parts to the GM
plant here in Texas and said GM was always cutting his contract down.
Until we see what happens to the auto industry it will be a real rollercoaster.
I heard reports that in Long Beach, CA the docks are running out of room
for all the imported cars coming in from overseas that are not selling.
* This is what I was talking about.
http://www.iht.com/articles/2008/11/19/business/19ports.php

[Andrew McCarrick]

Wow, S&P had its lowest close since 1997. Closed at 752. It's almost the same price as Gold. :blink:

[Michael Hastings]

It'll settle around 10,000 in 2 - 4 years. Just like every bubble in history, adjusted for inflation, it'll land right where we would have been if there had been no bubble in the first place.

Count on it.

Optimism is important as long as it doesn't blind you to reality.

If you look at the inflation adjusted dow over 80 years or so, even the general sharp trendline up would indicate a more realistic figure for the DOW is somewhere between 5000 and 8000 - and probably closer to the low end of that range than the high.

The Stock market was greatly overvalued just like the housing market, even adjusted for inflation.

The most probable reason is that in the '60s, American business began to take a finance oriented approach to measuring performance and evaluating "investment". Consequently decisions were/are made based on the dollar signs rather than the underlying assets and ROI of those assets. This trend grew through the 70s, became the dominant culture in the "greed is good" 80s, and remained through the last two decades with occasional fits and starts. Consequently, we have let our infrastructure erode, our manufacturing base disappear, our overall and relative education level decline, failed to discourage inefficient transportation and neglected investment in future sustainable energy technologies that would provide long term energy security and declining cost (look at what Reagan did to the programs Carter started).

It's easier to skim millions in bonuses and such based on quarterly results, but it catches up eventually. We are now experiencing eventually.

While I'm philosophically a libertarian, the reality is we have no system to allow it. A libertarian system basically requires a near perfect legal system and we are laughably far from that. Unfortunately, the only realistic solution to change things in the relatively near future, aside from allowing a total collapse - is for our government to dictate crash programs to achieve what we should have been developing for the past 40 years - and to challenge and rein in the financial world.

What are realistic odds of that happening? I don't want to speculate because what we are talking about is the future of my sons, daughters, and grandchildren and I don't enjoy playing dice with their future.

Electing Obama and a new administration/congress is a step in the right direction after the tragically disastrous "W" years but if we hope to achieve even INCREMENTAL positive gains it will require constant grass roots pressure on our representatives to eliminate Big business/corporate lobbying and getting them to vote for programs that will be worthwhile and efficient/effective and good for the country as a whole. Big business isn't inherently bad, but their necessary narrow focus tends to be bad for the system as a whole. Eisenhower was probably the last president that had the gravitas to really speak truth to power (and he still had to wait for his leaving office address to say it) when he warned of the dangers of the military-industrial complex to the REAL american way of life, and essentially it has all come true.

To paraphrase Franklin: "We have given you liberty - if you can keep it..." Well we've lost it. We only have a shot at getting it back if we really want it. And it probably won't be that great to wait until the pipelines dry up and we all go to duking it out with our AR-10s, pump shotguns and gold coin currency. It's a little more sophisticated than that.

When we had the 1930s depression the massive benefits of modern medical, manufacturing and computer technology (and modern finance to give credit where credit is due) were laying in wait on the shelf to pull us out of it. There is nothing so clear now and we have billions more people - so we are going to have to think and work ourselves out of it.

Rant over. How about that fullframe Scarlet!!:biggrin:

And just to show that I can be an eternal optimistic "How about them Dolphinst!!:biggrin:

[Sean]

Until we see what happens to the auto industry it will be a real rollercoaster. I heard reports that in Long Beach, CA the docks are running out of room for all the imported cars coming in from overseas that are not selling. * This is what I was talking about.
http://www.iht.com/articles/2008/11/19/business/19ports.php

I think we HAVE seen what's happened to the auto industry in North America. It's bankrupt. I know you mean, "Until we see what happens with the auto industry bailout," but I don't think a bailout changes the fundamentals. How many industries can be bailed out before they have to start saying no?


When we had the 1930s depression the massive benefits of modern medical, manufacturing and computer technology (and modern finance to give credit where credit is due) were laying in wait on the shelf to pull us out of it. There is nothing so clear now and we have billions more people - so we are going to have to think and work ourselves out of it.

The upside is we have way more than they had in the 1930s to bail us out. I believe we have several things in our favour. For one thing, the world moves MUCH faster. There's no way that a "depression" would last as long, because people, goods, information, all move lightning fast now. Imagine trying to re-ignite an economy when farmers were still traveling looking for work by horse and cart!

The Internet is much more powerful than anything they had in the 1930's to market and sell and inform. Nobody can be in the dark anymore. Innovation happens at light speed.

Finally, we are now a culture of "consumers." So many of the hardest hit people in the 30's were farmers and under-educated. They didn't grow up in a culture where "buying" is a part of your self-worth. They lived with hand-me-downs long before the Depression hit. You can't keep this same modern consumer culture down. They're scared, and they'll stay that way for a while yet. But they are very steeped in a consumer culture. They WANT a new TV and a new car. At the first sign of hope, they'll BUY it. Unlike the 30's where people hung onto their wallets for the rest of their lives (anyone else have a great grandfather who counted the nails in his garage to make sure no one stole them--while sitting on a very big bank account that he never touched). I think the modern generation will revert to their over-spending ways very quickly given the chance.

Hate to be the pessimist. The worst is coming. But the optimist in me believes it will much shorter lived than the first go-round. I realize even five years is too long for many, though.

[Michael Hastings]

How many industries can be bailed out before they have to start saying no?

How many can we lose until were f..ked? It's all about making choices that truly help the long run situation.

[R. Schorman]

bailout plus restructuring plus INNOVATION PLEASE!!!

the US automakers keep serving up the same crap and they wonder why they are going under

[Michael Hastings]

How many industries can be bailed out before they have to start saying no?

How many can we lose until were f..ked? It's all about making choices that truly help the long run situation.



The upside is we have way more than they had in the 1930s to bail us out. I believe we have several things in our favour. For one thing, the world moves MUCH faster. There's no way that a "depression" would last as long, because people, goods, information, all move lightning fast now. Imagine trying to re-ignite an economy when farmers were still traveling looking for work by horse and cart!

The Internet is much more powerful than anything they had in the 1930's to market and sell and inform. Nobody can be in the dark anymore. Innovation happens at light speed.

Finally, we are now a culture of "consumers." So many of the hardest hit people in the 30's were farmers and under-educated. They didn't grow up in a culture where "buying" is a part of your self-worth. They lived with hand-me-downs long before the Depression hit. You can't keep this same modern consumer culture down. They're scared, and they'll stay that way. But they are very steeped in a consumer culture. They WANT a new TV and a new car. The first sign of hope, and they'll BUY it. Unlike the 30's where people hung onto their wallets for the rest of their lives (anyone else have a great grandfather who counted the nails in his garage to make sure no one stole them--while sitting on a very big bank account that he never touched).

I'm not sure those are upsides - no matter how fast information moves innovation has to create something real. Selling Starbucks and video games to each other is nice and not unimportant - but it isn't really a foundation.

Rebuilding after coasting for thirty odd years is going to take real work. Those 1930s people knew how to do really HARD work and sacrifice. When they got an opportunity to combine that with the modern technologies, they exploded into the "greatest generation" and even if you handed them today's technology they would still have that work ethic. I don't know if we have that base. Virtually all of us still working grew up in the boom years and had a lot handed to us when we came of age.

In an era where we are fighting two major wars - without even raising taxes much less any other generalized sacrifices - it is hard to see how we have that kind of inherent stamina. Being steeped in a consumer culture and WANTING a new tv and car aren't good enough - YOU have to either make it or get it from someone who makes it and wants what you make.

Unfortunately instead of spending the time since 9/11 getting truly serious about our situation we mosey along borrowing from the rest of the world and now we and the rest of the world are realizing that there isn't really that much backing it up.

And if we continue to think the internet and consumerism will save us I would have to anticipate the worst.

[GlennChan]

It'll settle around 10,000 in 2 - 4 years. Just like every bubble in history, adjusted for inflation, it'll land right where we would have been if there had been no bubble in the first place.
Other bubbles have taken countries a lot longer to get out of... e.g. Japan, the Great Depression, etc. etc. On the flipside, I'd point out that the stock market usually is not indicative of the economic health of a country. The British economy has been fading away yet shareholders have been doing pretty well, while some emerging economies have seen explosive economic growth yet shareholders of those countries' stocks have not seen that great returns. Or look at the stock market crash of 1987... the market went down 20%+, yet nothing had happened to the real economy.

The US economy is not in that bad a shape. And the US has some really good industries, like technology (very high margins) and its film/TV industry. e.g. Canada heavily subsidizes its media industries, yet Canadian broadcasters will try to air as much American programming as possible because it makes more money for them (with some exceptions like news). The product is so 'good' that it overcomes other countries' massive subsidies... that's a great business to be in. You want your country to be in highly profitable, non-polluting industries. And the US does very well in those industries.

[Andrew McCarrick]

The Market tends to move a couple quarters ahead of what's coming in the Economy, so... not looking good for the next quarter (or two). Least quarter we had negative growth, I'm suspecting this quarter will be the same... which means recession.

[Alexis Hanawalt]

The US economy is not in that bad a shape.

I totally disagree. There have never been more economic indicators pointing towards a market collapse than there are today. It's a perfect storm.

One specific example: unemployment. The official figures are not derived the same way they were in the 20's and 30's. If we use the exact same measurements we find that our current unemployment is just a hair short of what it was leading in to the great depression.

[donatello b]

"US economy is not in that bad a shape'

HUH ???? when was the last time banks ( include world wide) , wall street firms , insurance company's started to fail and their gov't had to step in to save them ?
then add the 3 US auto makers, largest electronic retailer Circuit City near chapter 11 ( chap 11 for CC) ...
look at the business news each AM ....

true, entertainment media does well in bad economic times because people want to escape ...
IMO good times in 2010 but we have to go thru 2009 1st !!!! ouch !!!!!!!!!

[GlennChan]

Unemployment right now seems to be somewhere around 6%. According to Wikipedia (yeah yeah), unemployment during the great depression was 25% in 1933.

It's possible that in the future that unemployment might reach that level (or higher), but I can't predict the future.

2- I think you might be confusing financial markets and the US economy. (Or at least, I would treat them as separate things.) Sometimes the two are disconnected... as in the case of the 1987 market crash. The value of the real economy did not change 23% on that day.


Anyways, I have no idea how the future will turn out. Everyone is entitled to make up their own mind.
I'm just not worried about it and not panicking.

[Alexis Hanawalt]

Unemployment right now seems to be somewhere around 6%. According to Wikipedia (yeah yeah), unemployment during the great depression was 25% in 1933.

This is a long, but very interesting read that explains why the numbers you're citing aren't relevant: http://www.mindfully.org/Reform/2008/Pollyanna-Creep-Economy1may08.htm

The other elephant in the room is housing. The housing industry and related industries have been crucial to the economic growth of the US. These industries are obliterated right now. Las Vegas, the fastest growing city in the world for nearly a decade, actually lost population this year - the construction trade packed up and left. The amount of investment tied up in housing and construction equals virtually all of our economic gains over the past 5 years.

As for panicking, there are those of us who have simply been anticipating all of this for years. Read this: http://www.kunstler.com/Mags_Forecast2008.html written in 2007. Call it panicking, call it worrying, whatever... the bubble always pops.

[Meryem Ersoz]

It'll settle around 10,000 in 2 - 4 years. Just like every bubble in history, adjusted for inflation, it'll land right where we would have been if there had been no bubble in the first place.

Count on it.

huh?

assuming that this is even true, you're talking *at best* about a return to 5-year-old levels, without inflationary adjustments. a return to Dow 10,000 gets us back to where we started five years ago...

let's say it hypothetically takes 3 years, just to split the difference, to get to this imagined Dow 10,000, ...you've spent 8 years of your possible 30-odd years in the market without a making a dime.

and if you dollar-cost averaged your way in, on the way up to dow 14,000 and down through this year, over the past 5 years, you're even more underwater...

the S&P closed 37% below the 200 day moving average - that's an historical low, a record...we have *not* seen this before in the history of the markets. this is unprecedented.

i do think that this market is, at the moment, unhinged from the consumer economy. much of the selling is caused by the collapse of over-leveraged businesses, but it will take the rest of the economy down with it. bet on it. it's already underway.

i'll take the pessimists' side of the trade - it's the only one that has really been consistently working...

[Alexis Hanawalt]

Meryem, I believe we're both making relatively the same point. Mine is just more slanted towards the common sense of putting a ruler down on top of a graph that shows any bubble and drawing a line through it, matching the trajectory of the graph before the bubble, and you can see pretty clearly where we end up.

[GlennChan]

this is unprecedented.
Uh... 1929-1932. And Japan's market crash.

You could also say that Russian markets crashed when communists took over the country, hence all your stocks were worth nothing. (Now THAT'S doom and gloom.)

I think that in my lifetime I will see financial records broken... but personally I'm not concerned about it.

[Michael Hastings]

the S&P closed 37% below the 200 day moving average - that's an historical low, a record...we have *not* seen this before in the history of the markets. this is unprecedented.

let's say it hypothetically takes 3 years, just to split the difference, to get to this imagined Dow 10,000, ...you've spent 8 years of your possible 30-odd years in the market without a making a dime.

and if you dollar-cost averaged your way in, on the way up to dow 14,000 and down through this year, over the past 5 years, you're even more underwater...


but if you are underwater I can help you make your movie ...:biggrin:

Seriously, I think your analysis is right on.

[Meryem Ersoz]

Uh... 1929-1932. And Japan's market crash.

.

by "unprecedented," i was referring to the S&P 200-day MA close - there was no S&P in 1929 or Japan...not saying this is the worst crash ever.

not yet, anyway!

[Andrew McCarrick]

DOW Futures up 220 points.

[Steve Sanacore]

This has been a long time in coming. We get what we deserve. Our labor force in this country is so lopsided, with union auto workers make way too much and minimum wage way to little. And then big business perfecting ways to make money on other people's money without creating anything but paperwork and risk.... it was all a house of cards. It's just too bad the middle class in this country had faith in these greedy people who had our futures and retirements in their hands....

Don't mean to be bleak but i have so much resentment towards these types..

I just want to make movies, and these guys screwed it all up for us by wreaking the money supply for us all....

Hope it turns around in about six months or so, and in the end it should be better for us all.

[Andrew McCarrick]

10 minutes into trading, DOW up 165 pts.

[Andrew McCarrick]

Gold just over took the S&P....

Gold 777
S&P 757

[Andrew McCarrick]

Today, Dow closing up 500 points.

[R. Schorman]

hooray roller coaster. its not done yet.

[Alexis Hanawalt]

Another hint as to how serious this is:

http://dshort.com/charts/bears/four-bears-large.gif