Jimmy Higgins

The bubble in the NYSE is about to gush out 200 to 300 points early and probably finish 150 pts down with this news.

You know, I was figuring we weren't getting all the info when they dropped the rates again. Greenspan did it for a reason and this heightening unemployment is not a good sign of this economic recovery that people still have lingering hopes for.

Jimmy Higgins

Oh, I give up! Market is down 10 pts. Unemployment is up. Deficit spending related to the GDP is up. States are strapped. No recovery is in sight. WTF?!

Arken

Just adopt the Neocon strategy: Blame the president who isn't in office and claim it will all be better as soon as this president is out (because obviously the economy takes up to eight years to be affected by anything the president does.)

Ron Garrett

Myself, I ignore our government and focus on the IMF's analysis of the long-term trends. In particular I look at the amount of corporate leverage globally, which remains obscenely high. Cutting Fed rates helps leveraged companies with their after-interest cash flows, but working out the overhang from the asset bubble is a decade-long proposition. If on top of all this the housing bubble pops this fall as I expect it will with rising unemployment, and we start to get significant mortgage defaults, we could be in a world of shit that makes the current mess look golden.

It didn't help that Bush first took us back to deficit spending and then decided to completely bankrupt our social spending structure with tax cuts which in fact provide no near-term stimulus whatever. This is Radical Right economic policy that says significant unemployment reduces wages and benefits, i.e. destroys the overall bargaining power of US workers, and that by reducing our national standard of living to that in Mumbai we will be competitive with the emerging labor markets in India and China.

Since Bush has lived in a millionaire's bubble all his life, he doubtless sees no reason not to get the structural shifts over with, particularly since the chaos means opportunity for his billionaire friends to profit. When the musical chairs of massive market dislocation are over wealth will be more concentrated than ever, and that in the hands of his sponsors. From his point of view this solves the critical problem of insuring that the filthy rich will have to spend even less on domestic help.

If someone can demonstrate to me how our economy will recover as we continue to lose our highest-paying jobs to overseas markets and our mass of structurally unemployable workers grows, I'm listening.

Ruy Lopez

Oh, I give up! Market is down 10 pts. Unemployment is up. Deficit spending related to the GDP is up. States are strapped. No recovery is in sight. WTF?!

What you tried to guess, intra-day movement of the Dow, is quite hard. You must be a young man Jimmy--I hope you did not try to day trade today.

How would you like this instead? Sell short now and cover by Oct. 2003. At the same time go long on Oct 2003 and hold up to Jan. 2004 and no further.

http://www.cairns.net.au/~sharefin/M...wIndWeekly.htm

The chart says the Dow would trend downwards from now to Oct. this year.

FROM RON GARRET;

When the musical chairs of massive market dislocation are over wealth will be more concentrated than ever, and that in the hands of his sponsors. From his point of view this solves the critical problem of insuring that the filthy rich will have to spend even less on domestic help.

Not so sure wealth would be more concentrated than ever(with rich I suppose). Economic depressions are great levelers. I would think only a small fraction of the current rich will remain rich after this is over (assuming a depression takes place).

Most of the rich, who lack wisdom, may try to parley their wealth to make even more. That would be their undoing. That minority rich, who really have little "love for money"would recognize a hurricane is coming and would shut all hatches.

I'm not rich so don't take my word for it. Ask Warren Buffet.

Jimmy Higgins

Of course not. I have a commission free trading thing that does trading once a month. So I could never be so foolish. Honestly, I'm shocked. No one expected this bad news, but the market isn't reacting to it. Who knows why?

Optional

OK all you economist types...

What needs to happen to get the economy going again? Ignore what is politically possible or likely, just what would be the absolute best course of action?

-me

Ruy Lopez

Honestly, I'm shocked. No one expected this bad news, but the market isn't reacting to it. Who knows why?

Your surprise or shock seems to be based on "no one expected this" which is a good premise. Ordinarily there should have been a sharp reaction. Nobody knows for sure why but I'll venture two reasons.

1)If you check the daily chart link below, July 3 was the third day of a rally after market had dropped for nearly 3 weeks. I suspect the target of this reactive rally would have been Dow 9250 (the price spike 5 weeks ago on the other side of the peak). The market withstood very bad news with a moderate 72 pt. loss because it still had upward momentum. Look at it another way. Take 9250 and compare it to July 3 close of 9060? and you have a 190 pt. loss which is close to your initial reaction.

If the news struck during a downswing phase of a 6 or 12 day cycle, effect would be more dramatic.

http://www.cairns.net.au/~sharefin/M...rts/DowInd.htm

2)US treasury's plunge protection team might be at work.


From Optional;

OK all you economist types...

What needs to happen to get the economy going again? Ignore what is politically possible or likely, just what would be the absolute best course of action?

Economist types is okay but I'm not an economist. I'm afraid you won't like my opinion. Gov'ts should allow this long-term correction or liquidation to take place but try to soften the blows.

There could be others but two options to illustrate my point are:

1)Rapid collapse and crash like 1929 to 1933. In little over 4 years, a great mania was quickly liquidated. After this the only direction was up though in a convalescing manner.

2)A more gradual liquidation of past manias and excesses like what seems to be happening now. Gov't and probably its corporate America allies are probably cooperating to prevent a painful crash like 1929-33. Just soften the landing but it will take much longer to get it over with.

What you're asking "get the economy going again" like the 90s? is virtually impossible to give. Some kind of natural law is at work here. From the mania peak, it takes 14 to 18 years before the new prosperity era takes of.

I'll try to explain this impossibility from the darker side of human nature. In the stock market for example, the rich insiders and corporate owners got out from 1999 to 2001, near the top. Most of the parties holding stocks now are the public, mutual/pension funds and other non-insider portfolios both American and foreign. Most of these left inside are now breaking even or losing, some heavily.

Now, what reason do the insiders have to bid up the market and "save" those who are trapped? None. It is to their interest to wear out these anxious fearful and soon to be desperate people. Induce or push them to sell so the insiders can pick up the shares at basement levels. That's why great bear markets drop to 80 to 90 % from the peak.

You were actually asking about the economy and I cited the stock market. The idea is the same.

Jimmy Higgins

I think I gotcha. The 70+ pts it went down was a relatively high number to drop because of the market's mood and status.

I still think significant trouble lays ahead. Right now, companies have been becomign more efficient in order to produce a little less profit. The problem is, now with the changes in action, there is very little fat to cut now. The profits have no where to go but down. And with Turkey Day almost 5 months away, we could slip back into recession by then. I keep hearing an October end to the slide. That's only because of Xmas. I don't think sales will improve enough, not with unemployment, IN THE SUMMER, rising.

Kintaro

Inb other news, the Canadian dollar is past 75 cents, shooting for 80, as is every other currency in the world.


EDIT : Near, not over yet :P