Today should be another wild one. And what does Monday have in store? I got some '87 deja vu.
Another rocky start's on tap - Gloom deepens, as futures spell out bearish open.
LONDON (MarketWatch) -- U.S. stock futures turned sharply lower on Friday as investors expressed concern over the dollar's continued slide against the Japanese yen, and about computer maker Dell's downbeat outlook.
S&P 500 futures dropped 9.50 points to 1,395.40 and Nasdaq 100 futures slumped 22.75 points to 1,735.00. Dow industrials futures slid 77 points to 12,175.
The move, like others this week, came quick -- Dow futures were only down about 20 points at around 6:45 Eastern.
42 comments:
from
http://calculatedrisk.blogspot.com/2005/08/greenspan-on-asset-economy.html
Here's Greenspan on risk:
Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk.
Such an increase in market value is too often viewed by market participants as structural and permanent.
To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy.
But what they perceive as newly abundant liquidity can readily disappear.
Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices.
This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
Ok, but move that Black Monday chart a little more to the right. By mid-1988 the stock market had completely recovered, and the economy was largely unaffected.
People, faced with more to lose,
risk even more.
OK Al-Qweefer could you post a 10 year chart please from 1987 to 1997 or better yet a 20 year chart from 1987 to 2007?
Or hell how about a 50 year chart from 1947 to today?
And for bonus points why don't you post a chart comparing the DOW with the price of gold since 1971?
It's really strange how someone is buying stocks, of companies that have postponed their earnings reports. 3 mortgage lenders announced they are postponing earnings reports.
Failing to report is pretty ominous. It as least means things are worse than anyone has perceived at the company OR things are in internal turmoil so badly even the company can't give an honest report.
I'm starting to think a lot of this buying is computer driven. For example George Soro's hedge funds trades on algorithms only, and sometimes 10% of the trades on the NASDAQ are his company alone.
Computer driven trading which is not taking into account some aspect of the market that it is not quantifying properly, like, the algorithms failing to properly weight a "failure to report".
Hedge funds have a tendency to send letters to their members when a market undergoes wild volatility. LTCM blew up in '98 and became a mess easy Al fixed by cutting interest rates. So how active is the Plunge Protection team going to be now and in the future? The amount of leveraging in the markets is tremendous, meaning many are precipitiously balanced. And gold, supposedly a safe heaven, has sold off big, confounding traditional wisdom. Should be an interesting "sell in May and go away" time coming. Plus, gasoline runs up going into summer and that will take a bite out of the consumer's pocket & thereby hurt company earnings come fall. Falling earnings translate into higher P/E ratios and menaing the market will appear overpriced bringing on a sell off. Fed rate cuts seem to be coming before too long.
Things are different this time.
Keith,
Just take a look at this example of the Southern California housing bubble. There is no doubt that we are living in an inflated world that will need to get a quick correction. Consider this the cold turkey treatment and we’re being weened off the credit addiction.
Dr. Housing Bubble
I'll never forget the 1987 crash. I was 20yrs old sitting in a college class room when my professor, in his 60's, announced he just lost half his retirement. When you are out of time, there is no time to make it up, when you need the money. Today, Boomers are heavily invested in Wall Steet Casino, running out of time, with little favorable outlook on the economy.
Hey, can someone front me some cash? I want to flip this house, I can do it just like on TV.
Some people just shouldn't be in the equity market. Why is this "correction" a huge surprise after the run the market has had?
If you're a true long term investor...who cares?? There will be many more recessionary cycles & bullish cycles in your journey.
On a side not...Intersting to see the Gold & the Dollar down on the same day.
Tuesday was an anomaly, not a crash, says White House
Hindu - Chennai,India
How's that gold treating everyone today? Down another $15.
You were all saying something about gold at $1000 by April...
Ther is no doubt that if you have $ in the market, you are going to watch it drain out faster than you accumulated it over the past 1+ years. If you have the option to move your $ daily or weekly, now is the time to roll EVERYTHING over into a money market type account and buy back MAYBE.....MAYBE around November. If not, you at least were warned.
I find it funny that you are all cheering for this second great depression as if you won't be affected. So you have a couple of dollars in cash or gold or stashed under the mattress. How long will that last you, a year, two maybe if it isn't confiscated by the government or stolen from you first?
If this Great Depression is coming you'll lose your job (if you have one that is) just like everyone else. According to your theories the game is rigged. Only a small group of people - the ones pulling all the strings in the stock market - will survive. The little guy is screwed no matter what since he's completely powerless against the powers that be. So at the end of the day whether you rent, own, spend, don't spend, own gold, don't own gold, have credit card debt, don't have credit card debt it won't make a bit of difference. We're all doomed since we're nothing more than pawns in the game of the new world order.
Only difference between you and those you mock is they will have had a good time living on borrowed money and then become destitute. You will be destitute without having had any fun along the way.
Hows that silver and gold treating you? Happy to live in a 'free market' economy? Can you say rigged?
Burn baby, burn!
Gold's performance was not any better, you know.
Dear Keith,
Comparing the 1987 panic to today's situation is misleading because stocks were actually underpriced in 1987. Today, the stock market is overpriced by a factor of about 250%, same as in 1929.
The 1987 panic was actually a "false panic," and recovery was reasonably quick and painless. It occurred 58 years after the 1929 crash for a very good reason: The people who personally remembered the horrors of the 1929 crash and subsequently starvation and homelessness were all 60-65 years old or more. So they were disappearing (retiring or dying), all at once.
Thus, the 1987 panic occurred at the time of a significant generational change. Whatever latent fears that still existed about a recurrence of the 1929 panic were focused on this moment, as those who remembered the 1929 were quickly disappearing, and were replaced by those who didn't personally remember it.
Most people think that "wisdom" passes from one generation to the next, but in fact the opposite is true. The quick recovery from the panic of 1987 was the mechanism by which the Baby Boomer generation REJECTED the wisdom of the older generation. The Boomers saw that the 1987 panic turned out to be relatively painless, and they decided that the risk-aversive fears of the old people preaching financial caution were full of crap.
That's the event that launched the financial depravity and debauchery we've been seeing since then. With no further need to worry about a repeat of 1929, Boomers first generated the huge dot-com bubble of the 1990s. They learned nothing from the 2000 Nasdaq crashed, and have now created a new stock market bubble, a housing bubble, a liquidity bubble, a commodity bubble, and so forth. As those bubbles start to collapse, the Boomers are going to learn that 1929 wasn't so irrelevant after all.
For further information on this, please see my article, System Dynamics and the Failure of Macroeconomics Theory.
System Dynamics and the Failure of Macroeconomics Theory
Sincerely,
John
John J. Xenakis
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
The market is goig to finish down more than a 100 and still the economists say the economy is strong. I dont know which part is strong, wait, wait its the fuzzy math economy. No matter what happens, when everything has crashed, will they still say ,hey its a great time.
Dow down 5% for the week. Yes, this is a sign of a healthy market.
HP last Friday:
PEOPLE OF THE WORLD, THE TIME IS NIGH.
THE GREAT HOUSING CRASH IS HERE. DUCK AND COVER. LIGHT FUSE AND GET AWAY.
YOU ONLY HAVE DAYS TO PREPARE.
THE EPIC HOUSING CRASH IS UNDERWAY.
And of course, reality today:
Stocks Post Worst Week in Over 4 Years
Stocks stumbled in the final session of a tumultuous week Friday as the yen rallied against the dollar and concerns about the U.S. economy still dogged investors after Tuesday's huge drop.
The Dow Jones industrials logged their worst weekly performance in more than four years; until this week, the stock market had gone more than 45 months without a drop of more than 2 percent in a single session.
http://www.businessweek.com/ap/financialnews/D8NK9EG01.htm
Jeff said:
"Ok, but move that Black Monday chart a little more to the right. By mid-1988 the stock market had completely recovered, and the economy was largely unaffected."
That didn't stop a friend and co-worker from jumping off the Golden Gate bridge due to Black Monday. He lost not only his shirt but the shirts of relatives he was "wisely" investing for.
I sh*t you not.
Looks like my 401k.
War is peace
Debt is wealth
market correction is strength & economy is strong.
A 5% drop in the market???? if thats making you nervous by all means get out of the market. Jeeez what does that take us to? All the way back to November levels??? What a debacle, run for the hills. I hope it drops a bit more, the recent renup has been way overheated
OK if starts to go past 15% in the next few weeks I'll start getting a little nervous.....everyones got their 'Oh shit!' level I guess....
I can't come up with a witty retort to all the folks poking fun at us gold buyers. Fact is that gold and silver are down sharply this week, right along with the DOW. I am admittedly surprised as I figured when stocks began to show weakness people would shift to gold or silver. Didn't happen. Maybe it still will but who the hell knows anymore. Nothing about the economy makes any sense at all. Good news is bad, bad is good and so on. I probably won't sell gold/silver as I don't really know what better to do with the cash at this point. Anyone with any USEFUL tips are welcome to give advice. My confidence is shot at this point. Ready to join the masses who don't care and just borrow and spend until the day of reckoning.
JAFO
The gold fell off this week because any informed investor with a brain, like HPs, know that Bernanke is messing up with the gold market to keep the dollar from falling even more. Furthermore, every MSM outside the US exposed how the Chinese government forced Chinese state owned companies to buy stock so that the Shanghai market could show improvement. There's desperate manipulation everywhere to keep the market afloat, but it won't last.
"Only difference between you and those you mock is they will have had a good time living on borrowed money and then become destitute. You will be destitute without having had any fun along the way."
There is a certain truth in that statement.Damnit!
The GS analyst said the downturn is just beginning. He said you will know the bottom is near when the flight to quality begins - people start freaking out and buying precious metals. I'm looking at NASDAQ 2000 and DOW 10000 before the market reaches bottom. BB will lower the rates to 3%. Housing will be an albatross for most people who bought in 2004 or later. People who bought prebubble will be fine unless they took out a HELOC. There will be plenty of foreclosures and repo's for anyone looking to buy big ticket items.
Imagine the bubble suckers who bought a house for $750K in 2005, finding out that a neighbor bought a similar house for $450K in foreclosure two years later. This coming credit crunch will be a wonderful thing.
"So you have a couple of dollars in cash or gold or stashed under the mattress. How long will that last you, a year, two maybe if it isn't confiscated by the government or stolen from you first?
If this Great Depression is coming you'll lose your job (if you have one that is) just like everyone else."
Speak for yourselves Kudlow & Cheney worshipers, I have money in different currencies, in different countries, got dual citizenship, and property overseas. Some of you have the misconception that HPs are watching Fox News all day, that we don't have advanced degrees or any international experience. Dream on. Prepare yourself because it's going to be ugly. Actually, you HP haters know that something is not right out there, you can feel it, so you wouldn't be hanging around on this blog, right?
I think that everyone who doesn't believe the HPs should go out there and buy a huge McMansion in a bubble area with an I/O finance, should put all their stocks into a Dow or S&P index, lease a brand new BMW 740, and charge a new Rolex in the credit card. Hey, Kudlow, Bush, Cramer, CNBC, Wall Street Journal, Forbes, Lereah, are all saying that everything is so rosy. Go ahead and follow them to your grave. Perhaps you already did all that and now are a bit anxious...if so, sorry people, you are screwed! We would never lie to you.
Well the good news is, if there is a crash then the rental market can pick up the left overs.
I think the baby got thrown out with the bathwater during the panic. We really can't judge why gold, or anything went down besides general panic.
However, now that things are down, it's time to buy those that went down for illegitimate reasons and so are destined to go back up sharply.
Silver anyone?
Trimming the DOW 5% was just trimming off the deadwood.
Huh? What? Some vital limbs also got amputated?
You're what got cut off?
> Actually, you HP haters know that something is not right out there, you can feel it, so you wouldn't be hanging around on this blog, right?
Wow - sounds like a line from the movie "The Matrix".
yes, but most people do what they are forced to do, unless like me they do not, thus then, they do not do well., or until the rug is pulled out from under them, by those doing the forcing, as their wages
dont play poker with someone using funny money, or i see your 6 and raise you 14 borrowed, to your hard earned, hard, long saved for 2?
Speak for yourselves Kudlow & Cheney worshipers, I have money in different currencies, in different countries, got dual citizenship, and property overseas. Some of you have the misconception that HPs are watching Fox News all day, that we don't have advanced degrees or any international experience. Dream on. Prepare yourself because it's going to be ugly.
The unabomber had two Phds from MIT. Education and paranoia are not mutually exclusive.
I read all sorts of stuff online, it's entertaining. Doesn't mean I believe what I read. This blog is actually rather "mainstream" compared to what else is out there. At least you nutters haven't started seeing 3 horsemen...yet.
I read dailykos every day too, doesn't mean I take anything those idiots say seriously either.
Someone with multiple advanced degrees and international experience should understand that.
The Dow will slip to at least 11,600 over the next week or so. What you're witnessing now is actually the calm before the storm.
Now that the sub-prime lenders are going belly-up at a faster pace, I expect a larger corp such as Wells or Countrywide to release bad news during their Q1 results. It's one thing for a foreign company (ok, multinational) such as HSBC to have bad numbers. Wall Street pretty much shrugged HSBC off in favor of more Koolaid.
However, once Wells, Coutrywide or __________ releases their Q1 numbers, the shit will indeed hit the fan. This will get The Streets attention and the carnage will take the Dow down another 5-10% to around 10400-10500.
Lets not forget the recessions we're experiencing in the auto, manufacturing, and real estate industries. The job losses will be staggering.
This is going to be one devil of a recession.
Chris G
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