Dramatic Turnaround: 600-Point Swing for Dow

DuH2 · #1 (**permalink**) 01-23-2008, 03:10 PM

Quote:

Don't blink or you might miss a huge sell-off or an even bigger rally in this very turbulent market.

Wall Street turned a 300-point plunge on the Dow this morning into a 300-point jump this afternoon as traders evidently found stocks at a discount after a series of sell-offs in recent days.

http://www.foxbusiness.com/markets/a..._446882_2.html

justabubba · #2 (**permalink**) 01-23-2008, 08:18 PM

these is a lot of wisdom in this fellow's observations:

Quote:

American households are in deep structural trouble, so they aren't going to borrow more and they won't spend their rebated pennies from heaven. They are finally waking up to the reality that in the past two decades they have borrowed and consumed too much, while saving very little. Call it Aesop's "The Ant and The Grasshopper" or the hangover after a binge, the effect is the same: people will go into a prolonged period of abstinence in order to repair their financial damage.

Personal Saving Rate (Income Minus Spending)

This is not a morality tale, however. It's not about castigating people who, as I said in previous posts, had to borrow in order to maintain a decent lifestyle. Look at all the data you want: in the end you will find that while corporate earnings rose as much as 40% per year, wage increases for working Americans came to a pittance (see chart below, click to enlarge). Businesses "did not share" and this is a monumental mistake that corporate America is going to regret for decades to come.

Annual Change in Corporate Profits (blue) and Hourly Earnings (red)

This is not a morality issue, either. It's not about ethically "bad" corporations vs. "good" workers - though I bet that's how it will ultimately play out when the political pendulum swings to populism. Instead, it's all about competence: if top managers don't have the common sense to pay workers enough to comfortably afford their own goods and services a la Henry Ford, then they are immensely incompetent businessmen, plain and simple. If they face dumping from abroad, then they should be screaming bloody murder to Washington, instead of sending campaign contributions.

Furthermore, making up lost earned income in the form of increased asset wealth is a fool's errand: financial asset ownership is highly concentrated to the top 5-10% of the population and real estate, though more evenly distributed, is not liquid enough to substitute for income. In fact, borrowing against housing "wealth" while incomes stagnated was the proximate cause for the current mess.

Washington needs to wake up. This is not their daddy's ho-hum recession but a virulent grand-daddy come to visit from the late-19th century. The trifecta of high debt-low income, zero saving and asset deflation cannot be overcome with low interest rates and pocket change. The credit crunch shows us that borrowing is part of the problem, not the solution, and panicky tax rebate proposals are proof that it is income that is lacking, not lower taxes.

Finally, Dr. Bernanke should understand that financial markets are in practice composed of manic-depressives that always demand more meds, not reasonable ivory tower academics who realize when to stop. It is his job to know when to give in and when to just say no, otherwise the inmates will take over and tear the whole place apart. Look at what just happened: the Fed did the biggest one-day cut in its history, down to 3.50%, but the inmates are already back demanding more, with 3m T-bills at 2.30%, 2-year notes at 1.95% and 5-year at 2.50%. I hope the Chairman can recognize market blackmail when he sees it.

http://suddendebt.blogspot.com/2008/...-to-water.html

DuH2 · #3 (**permalink**) 01-23-2008, 08:58 PM

Quote:

what are the chances your "good" economic news will be long-term?

I dunno but it seems reasonably likely the Democrats lost theirs politically

justabubba · #4 (**permalink**) 01-23-2008, 11:04 PM

folks who lived thru the great depression always recognized it was hoover (republiCON) who allowed that tragedy to commence and Roosevelt (democrat) who took care of the common man and provided aid as the country survived the economic crisis
would not be surprised if history recognizes dubya as the equivalent of hoover (or worse) and hopefully a democrat (or better yet, Dr. Paul) will emerge with an answer to this dilemma

The Blog of A Cowboy · #5 (**permalink**) 01-24-2008, 07:09 AM

You had me until the doomsday stuff came up....For a few paragraphs, I thought there was one non-doom-and-gloom anger rant-ologist here.

ooops, my bad,,

Maybe what America needs is just more editorial oversight....

ABoyNamedSue · #6 (**permalink**) 01-24-2008, 07:12 AM

A lot of folks consider FDR's "New Deal" as a blatant form of socialism, too.

Maybe that just solidifies the notion that today's "uber-democrats" are nothing more but socialists in democrats' clothing.

Blade · #7 (**permalink**) 01-24-2008, 07:28 AM

I sometimes wonder what people are thinking. They take on mortgages they can't handle, and then taxpayers are supposed to bale them out. I was shocked when I heard that the average household credit card debt is $9,000. What are they thinking? I see huge numbers of ultra fat people. People let that happen to themselves, they yawn at the 20 million illegal aliens, they let John Edward-type tort lawyers run wild, and then they're stunned at health care costs. This country is going to hell, and it's not "the corporations" that are sending it there.

DuH2 · #8 (**permalink**) 01-24-2008, 01:12 PM

Hoover got the blame for something that was coming anyway. Coolidge (President before him) just lucked out.
Hitler probably did more to get the USA out of the effects of the Depression then Roosevelt.
Roosevelts socialist solutions did work and where needed at the time..many where to be temporary.......75 years later and the Temps are still there.

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