Friday, November 21, 2008
Down 22 Percent Since The Election
While this morning, the stock market may seem to be having a positive day, it is the last hour of trading that will actually determine the final fate of the market. For days now, the market has literally imploded in the last hour of trading from its day-long upside activity.
Since the day following the election, the stock market has dropped like a rock. As of yesterday, the Dow Jones Industrial Average was down just shy of 22 percent in only 12 days. Prior to the election, the stock market had somewhat found a floor and was moving sideways. In fact, the six days prior to the election results, including trading of the election day, there was a 17% rise in the Dow Jones Industrial Average.
Nothing says more than facts and the stock market is screaming facts. The fact that the market reversed itself after Barack Obama won, speaks volumes. Also, the fact that the market has fallen so much, since that time, says even more. This market is not happy with Obama or the Democrats being in control.
Some might say that its all about the credit bailout and has nothing to do with Obama being elected. If that were true, the floor (as shown on the chart); then, the upward movement through election day; followed by a consistent downtrend since Obama won; isn't saying that at all. This bailout was probably one of the reasons the non-business savvy voters elected Obama. There was certainly a lot of voting for Obama in the punishment of the Republicans. However, the stock market is another form of an ongoing election. Trillions of dollars are being yanked from the market for it to fall like this. It is falling because their is no buying. What that says is that there is no foreseeable turnaround in the economy with the new Obama Administration. Many people around the world invest in our market and they, too, are saying that they have no faith in our economy going forward. There is nothing in the bailout plan or in the current sets of economic numbers to give them cause to put money in any company. That just shows fear that they will ultimately lose money if they invest in America. Even the traditional safe bets, like gas and electric utilities, are off the table because of the severe environmental legislation that could be imposed by the Democrats and their just-elected leader.
Only 6 weeks ago, I thought I had seen a stock formation that showed the stock market finding a bottom. I was wrong. That's why investing is an art and not even close to being a science. Obviously, my projection was wiped out by the investment community's reconsideration and reassessment of the bailout plans and the business conditions going forward. Right now, I can only say that the market looks to be in a free-fall. Where it lands is absolutely undecipherable at this juncture. Currently, the stock market is at trading levels that it weren't seen since 1999 and just a gnats-butt away from 1998 trading levels. Given everything that is going on, there is no reason to assume that we won't reach 1998 trading level. When that happens, ten years of stock trading will have been wiped out in just a little over one year.
This bull market really started in 1982; during the second full year of the Reagan Administration. It followed four horrible years under Jimmy Carter. In 1982, the low point of the market was a Dow of 770. From there, it rose to 14,198 in 2007; a near 18 fold increase in value. Now, we have nearly lost 1/2 that value from the 2007 high with the Dow currently sitting at 7500. I don't think, now, that it is unreasonable for this market to get back down into the 4000's. That is another loss of 3000 points. As horrible at that may seem, a fall to that level over the next few months would be no greater than the 3000 point loss that we saw last month.
What could stop a lot of this bleeding is some reassurances by our incoming President. I guarantee you that if he would declare, based on current economic conditions, to put off his proposed tax increases and tax cuts and just maintain the status quo, the markets might stabilize. The fact that he hasn't, implying that he won't, has the investment community running in fear. The stock market declines are also unsettling the general population. These declines and the proposals for more and more bailouts are dominating the news every night. This fact just feeds on the fears of the consumer. Any recession is generally ruled by and continued on until the psychological fears of losing a job are only abated when people's confidence is reestablished and they start buying once again. Mr. Obama needs to understand this. He needs to put a floor back on the stock market by backing off his plans. It would also help if he would announce a great choice, not just a good choice, for the Secretary of the Treasury job. Above all, his waiting on this decision is just causing more unease. Being a lame-duck with less two months left, there is not a lot that Bush can say or do right now. Mr. Obama needs to take the leadership role, now, and get out of the campaign mode. He needs to put the best interest of the country ahead of his unrealistic and, quite frankly, business killing campaign pledges. This is no time to just vote "present" as he did for so many years in the Illinois Senate.
Note: A larger view of the stock chart (above) can be viewed by clicking on it.