Thursday, October 09, 2008

Less than Happy Anniversary


The stock market's collapse accelerated Thursday as bank lending remained stubbornly clogged and investors remained unwilling to hold anything except cash and government debt, no matter how tiny the returns for doing so.

The Dow Jones Industrial Average declined for a seventh straight day, plunging 678.91 points, or 7.3%, to 8579.19. Blue chips last dipped below the 9000 level five years ago. Thursday's fall was the Dow's third-worst all time in point terms and 11th worst in percentage terms. During its recent losing run, blue chips have fallen by a startling 20.9% and are down 39.4% from their record high, which was hit exactly one year ago. (WSJ, 9 Oct 2008)

All that basically sucks, but it doesn't look nearly as bad when you look at the (really) big picture...It doesn't look quite as bad.

Personally, even though my 401k is probably getting hammered in the rear right now, I've got long enough before I need to draw from it that this decline in prices is basically a buying opportunity. Not a pretty one, but even though my value has gone down, my buying power has increased significantly!

Also, crude oil prices fell to their lowest point in eleven months today, to under $87 a barrel, but gas prices at the pump haven't kept up the pace:

The last time oil sold for $87-per-barrel was October 2007, according to the U.S. Department of Energy. But current gas prices nationally and in Phoenix remain more than 60 cents higher than last October.

The national average stands at $3.40 per gallon, well above October 2007’s $2.77, according to AAA. Phoenix-area average prices stand at $3.27 per gallon compared to $2.65 a year ago. Current prices, however, are down from summer highs of more than $4 per gallon. (Phoenix Business Journal, 09 Oct 2008)

I don't know why that is, but I don't like it.

And further proof from the WSJ that the stock market operates purely on emotion and speculation, not hard data:

Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, said the fear that has seized the market lately may be an unintended, self-fulfilling consequence of recent efforts in Washington to pass a $700 billion rescue of firms saddled with illiquid mortgage securities.

"To sell the bailout to the public, everyone from the President on down had to go out and tell people how bad everything was, that the world was coming to an end," said Mr. Paulsen. "Ever since, people's expectations about the economy have gotten worse and worse and worse, and their reaction to each new action to fix the problems has gotten worse and worse and worse."

Oh well. Remember, buying opportunity!

**In other news, I might have to figure out how to be Freddie Mac for Halloween. :D

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