Free Markets, Free People
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.
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.