Monday, October 13, 2008
"First" of the Day: Crash of the Dow
For the week, the Dow [Dow Jones Industrial Average] fell just over 1,874 points, or 18%, its worst weekly decline ever on both a point and percentage basis.
The Dow, or DJIA, represents an average of the value of the stock of "30 of the largest and most widely held public companies in the United States." These are companies that only those living in a bunker would not have heard mention—General Motors, American Express, Chevron, Coca-Cola and so forth.
What last week's crash represents in putative dollars is summed up by the figure $2.4 trillion. One way to look at that number is to consider that under present estimates of the US federal budget deficit for 2009, the government will lose only $1.3 trillion, as measured against the budget surplus the Congressional Budget Office had foolishly projected for 2009 looking forward from the dark year 2001 when George Bush took office. And it is only $1.4 trillion less than the government is expected to lose for the entire 10-year period
This biggest weekly decline of the Dow follows on the heels of another "first" two weeks
Stocks skidded Monday, with the Dow slumping nearly 778 points, in the biggest single-day point loss ever, after the House rejected the government's $700 billion bank bailout plan.
Which goes to show that the investing class only distrusts government on the days they're making money.
Adding to the market panic have been the repeated reassurances from George Bush that the government is working to fix the problem. Every time his handlers trot him out to make an announcement on the soundness of the economy, stocks take a dive.
If White House financial advisors ever hope to see a recovery, they must send the President abroad until his term is out or at least hide him under a blanket. Instead they're discussing the possibility of having him meet with the heads of the other G-7 countries—Germany, Britain, France, Italy, Canada and Japan. One can only hope they'll bring a map.
On this week's horizon, beginning Wednesday, are government reports on consumer spending and housing starts, inflation numbers for September, business inventories and industrial production. That should test whether the market has a bottom.