The Bonddad Blog: Today's Markets, Part II

Thursday, November 20, 2008

Today's Markets, Part II

Several people have asked if I still think the market is bottoming. Frankly I don't know at this point. I need to think about this and write on it when I have an answer.

5 comments:

JC said...: Calculated Risk has this awesome/scary chart regarding the last crashes.

It would be interesting to look at the fundamentals of the 73-74 crash, we know a lot about the 2000-2002 crash and recovery.

It seems, in a way, that this crash combines two of the features of those crashes -

1. Unwinding of a bubble - like 2000.
2. Credit constraint/dimunition of buying power. This was due to the oil shocks in 73-74, today, due to a number of events -

a. Credit markets themselves are simply tapped.
b. Housing unwind
c. No one wants to lend.
d. On top of that - a real recession in the jobs market.

Probably a few more elements.

Given the drag of "NO credit", until that situation eases, and credit becomes possible (because it is a HUGE drag right now, to get financing - the engine of debt issuance is like swimming through water to get to where you want to go, compared to normal times), if we are at the bottom, we are going to stay there awhile.

If the Big 3 car companies go under - I shudder to think - this will be worth another 1000-1500 points for the Dow, over the next few months. You can't simply lose that much economic activity, without there being a big, big hit. Not only for the car companies themselves, but the millions who provide parts, labor, insurance, etc, etc, for the car companies.

After all - right now - who will replace that activity??; November 20, 2008 at 5:03 PM
Anonymous said...: http://www.economics.harvard.edu/faculty/rogoff/files/Is_The_US_Subprime_Crisis_So_Different.pdf

this is a good paper comparing recessions that I found useful.

Please do not feel 'on the line' re the bottom question - we know no one knows - just value your opinion.

Thanks.; November 20, 2008 at 6:16 PM
Alex said...: Bonddad,

I've been reading you for a very long time. I know you had some money sitting on the sidelines from well before 2008 and from the recent change in your tone, it seems as if you had put some of that back into the market recent and then got personally invested in the outcome of technical charting. Get back to the basics (that you taught me!) -- 1) Look at transports, Follow all the indexes (the Russell and Nasdaq had broken support a day and two days, respectively before the S&P), 3) Look at macro.

You and CR and Big Picture have helped me protect my (limited) retirement funds and I'm very
grateful.

-Alex; November 20, 2008 at 8:27 PM
Mylegacy said...: Bubbles burst. Pop.

There is one bubble left - the US dollar and when it POP's - and it will when we start printing the money we need to pay for the money we borrowed to give away to the gangsters that put us here in the first place - the US will have then officially completed it's descent into hell. We will have DESTROYED: the factories (all shipped overseas), the jobs (no factories no work), the housing wealth of the nation, the "New Financial Economy," and finally "pop" the currency. Our international reputation was destroyed years ago when we elected a moron - twice.

Just goes to show you what 25+ years of Reagan's INSANITY of trickle down, deregulate, government is the enemy koolaide can do to an economy.; November 20, 2008 at 10:53 PM
Anonymous said...: Bondad, Big Picture, and CR.... An every day stop for me. But I do stop here first, being that Bonddad got me started on learning about this "stuff"...

I have to admit, even though my hubby says he has most everything in a pretty safe place, even I am starting to feel anxious when I watch CNBC.

I feel sorry for Obama, he is facing a huge mess that is getting worse every day, while he can't do anything.

JWC; November 21, 2008 at 10:11 AM