Free Markets, Free People


The economy–how bad is it?

One of the well known institutions that politicians like to point to when things are going well or bad is Wall Street’s stock markets.  They’re an indicator that at times are used to point out that things aren’t as bad as they seem and as well as illustrate how bad things really are.

Today is one of those latter examples.  The Dow and other indices plunged.  The Dow Jones Industrial is off 512 points, its 9th steepest drop ever.

chart_ws_index_dow_20118414253.top

 

The question of course is “why” and what one has to hope is the answer is something to do with a temporary situation.   But it doesn’t appear that’s the case.   Looking out at the broad economy, it seems, investors don’t at all like what they see.  Add the government’s continued inability to address the debt and deficit and you have what could be the beginning of many down days on the street.

"The conventional wisdom on Wall Street was that the economy was growing — that the worst was behind us," said Peter Schiff, president of Euro Pacific Capital. "Now what people are realizing is the stimulus didn’t work, and we may be headed back to recession."

That’s not what you want to hear when you’re hoping to see investment and an economy turn around.  And unfortunately, Wall Street is a place with a herd mentality, and when some investors get spooked, they all get spooked.  Yesterday indicated they’re spooked.

There’s "total fear" in the market, said Bob Doll, chief equity strategist at the world’s largest money manager, BlackRock.

European and Japanese policy makers had to step in and shore up their markets as the sell off gained momentum.

"In the last two weeks, we’ve been through the ringer," said Rich Ilczyszyn, market strategist with futures broker Lind-Waldock. "When we start looking at the recovery, there’s nothing to hang our hats on anymore."

So despite assurances that a “deal” to raise the debt limit would have a calming effect on world markets, the reality is it didn’t.  And Europe is in pretty deep trouble which is also reflected in this loss.  Add in the poor economic reports here that continue to pile one on the other and you have a situation that looks increasingly bleak.  The unemployment report today is most likely only going to underline that fact with most economists expect poor job growth to continue and the unemployment rate to stay at 9.2%.  And now the Dow has lost all of what it had gained in 2011.

Stay tuned.  Rocky road (continues) ahead.

~McQ

Twitter: @McQandO

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11 Responses to The economy–how bad is it?

  • For three years, the only thing keeping the stock market buoyant was that bonds were such a bad investment (fixed price while inflation loomed) but now there’s no where to “hide” you money.and the long-term prognosis is horrific,
    So we can expect Capt. Bulls&#t to revert to the bad economy he inherited, but he inherited the bad economy from the Democrat Congress, where the market peaked just a few months after the Dems took over and showed their fascistic/crony-capitalist stripes.
    Man! All this so a few more minorities could in homes beyond their means.
    Bastiat’s bit about government as the great fiction comes to mind.

  • I read yesterday that many ‘experts’ think stocks are still over priced.  Also it looks like Italy is pretty bad off as well.  Another Greece?
    What does the continued long term high price of oil do to the world’s economy?
    What will this do to oil prices & futures?  http://www.guardian.co.uk/world/2011/aug/03/iranian-opec-president-revolutionary-guards

  •  

    The annual cost of regulation—$1.75 trillion by one frequently cited estimate—represents twice the amount of individual income taxes collected last year.
    ***Overall, from the beginning of the Obama Administration to mid-fiscal year (FY) 2011, regulators have imposed $38 billion in new costs on the American people, more than any comparable period on record. Consider Washington’s red tape to be a hidden tax.***
    The mountain of regulations didn’t begin under the Obama Administration. Under the Administration of George W. Bush, for example, $60 billion in additional annual regulatory costs were imposed on Americans. [How much of that was despite, rather than because of, Bush?] But as Katz and Gattuso write, the rate at which burdens are growing has accelerated under the Obama Administration.
    –Heritage Foundation

    Lisa Jackson is literally nuts, IMNHO.  She believes in racial myths that compare nicely to the AIDS myths, and while she holds a degree in science, I have seen NOTHING that supports that she has any allegiance to anything rational.

  • Jobs report – +117,000 – which will be revised, quietly, downward in a few weeks.
    Unemployment 9.1 – which will be revised, quietly, upward in a few weeks.

    Say it with me children – “Unexpectedly”

    Meanwhile – pahtay time at the WH.   I hear Caesar Obamus has ordered another 50 lions from Nubia for the games.

    I entertain myself by imagining the headlines if it were George W. Bush’s birthday.

  • This is simple to wrap one’s paws around.
    As an individual, if I’m uncertain about tomorrow, next week or next month, I’m going to be very cautious about how I spend my income. I’m only going to purchase what I must, and even then, I’ll shop around. I want as much of a buffer against (perceived) gathering storms as possible.
    As an institution, while things get considerably more complicated, the premise is much the same, take great care in your purchases, keep your powder dry, and save something in reserve when the tide turns. Labor levels being truly a prognosticator of your faith in the level of future business.
    Economically responsible individuals and job producers alike are unhappy with the economic and political direction of the nation; they are voting with their purses. While our current debt didn’t happen over-night, the situation is not reversing course, far from it in fact, it looking more dire with each passing week.
    The Left-Right argument is a diversionary tactic that wastes precious time and resources.
    We find ourselves with a behemoth Statist government that writes laws for we serfs, they-themselves are not bound by; while getting rich on insider trading. Something ugly doth live in Washington.

  • How screwed are we?  Lessee…

    We just had the largest increase in the debt ceiling ever*, and DC clearly intends to spend to the limit.

    The Fed is just about out of things that it might be able to do to stimulate the economy, like lower interest rates (unless they want to start PAYING people to take loans).

    Housing market continues to tank.

    Unemployment is steady at “bad”, and the only reason it’s steady / not as bad as it might be is because the BLS carefully avoids counting people who stopped trying to find work.

    Stocks are tanking.

    PIIGS are in increasing hot water.

    Captain Bullsh*t talks about nothing but taxes… though even his mouthpiece admits that the White House can’t create jobs.

    States are dealing with their own unfunded liabilities in the form of public employee pensions and benefits that they are increasingly unable to afford to pay.

    Captain Bullsh*t’s former economic advisor publicly states that we’ve got a one in three chance of a double-dip.  Heaven knows what he REALLY thinks…

    Yeah, I’d say we’re about as screwed as Marilyn Chambers.  And not in a good way!

    —-

    (*) Does anybody know how that stacks up if adjusted for inflation?  DId we borrow more in real terms during World War II, perhaps?

  • Bank of New York Mellon Corp. on Thursday took the extraordinary step of telling large clients it will charge them to hold cash.
    Bank of New York Mellon is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets. Liz Rappaport has details.
    The unusual move means some U.S. depositors will have to pay to keep big chunks of money in a bank, marking a stark new phase of the long-running global financial crisis.
    The shift is also emblematic of the strains plaguing the U.S. economy. Fearful corporations and investors have been socking away cash in their bank accounts rather than put it into even the safest investments.
    The giant bank, which specializes in handling funds for financial institutions and corporations, will begin assessing a fee next week on customers that have been flooding the bank with dollars, Bank of New York told clients in a note reviewed by The Wall Street Journal.
    The decision won’t affect individual savers, who already are stuck with near zero interest rates as the Federal Reserve keeps rates low to support a soft economy. But it is a glaring sign that corporate executives, bank leaders and money-market fund managers are fleeing from risk and hoarding cash as the recovery threatens to peter out.

    Gadzooks !! Banks make you pay to hold your cash. It is bad.

    • Banks are required to pay the FDIC regardless of how much they can earn lending out funds. So if a bank cannot make more on its deposits than it must pay the FDIC, then it must charge the account holders.

  • The stock market has traditionally been viewed as a leading indicator predicting economic health 6 to 12 months hence.

    However, with the advent of mass computerized trading algorithims looking for short term arbitrage positions rather than traditional dividend potential (read that long term investments in companies) I’m not sure the stock market is an indicator of economic health anymore.

  • The economy–how bad is it?

    Is hyper-sucky a term…???

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