The stock market, you may have heard or felt in your portfolio, is having a lousy time of it.
The last time I checked, the Dow Jones Industrial Average was down 372 points to stand at 11,501. That's a big drop, of course. The Dow is down more than 1,000 points from its recent high, which means you don't want to be hitting "one step update" on Quicken anytime soon. Oh, and you don't want to retire.
Clearly, there's lousy economic news to feed the bear. But the "lousy economic news" is also a media narrative that creates even more lousy economic news. To feed the narrative, you have to work harder for new angles to explain just how lousy the economy is. That's simply the way it works in the news business.
That's not saying things aren't lousy; they obviously are.
But you see that picture up there? We're using it to accompany the story today about how lousy things are and it's clearly captioned as a file photo from May 25, 2010 (No sense buying a new one; all pictures of stock market traders look the same). Things were perceived as lousy on that date, too, apparently.
Those panicked traders had no idea what August 4, 2011 would bring. On May 25, 2010, the Dow lost 22 points and closed about 1,500 points lower than it will today.
Everyone come in off the ledge. There's something terribly wrong if I'm the half-full guy around here.
Scenario #1: I think the ledge creepers are looking at trends. After sucking in 2008, 2009 and 2010 were good years for the Dow. We thought things were back to normal, slow but moving up and to the right like all good graphs do. Now 2011 brings us nothing through the first seven months - actually down 1% on the year. Sure beats down 20% like 2008 but not up and to the right - just straight to the right and tending towards the bottome corner.
1250 on the S&P was a technical support level, we tested it and blew through it. If you place any credence in those than you expect another 60 points before we hit another support level on the S&P - that is another 5% down to go.
So our houses aren't worth as much as we thought they were, our stocks may not be worth as much as we thought, sovereign debt doesn't seem to be holding value like it used to (that is where all the portfolio dollars that were in real estate went). If the Euro breaks and nothing happens on US debt the banks are going to find themselves where they were in 2008 with no possibility of TARP to bail them out. Once the banks reel in to correct the balance sheet at the same time everyone is scrambling for assets we could have meltdown.
Meanwhile geopolitical risks are growing in the middle east and if the Euro does break it is not hard to see tensions escalating there.
That is what is scary. (Sellers today)
Scenario #2: just a blip don't worry about. (Bob and a good portion of the rest of the world...but nobody sells stock photos of people going about their daily lives)
Scenario #3: Same as 1 but too poor to lose any real money, confident enough that cats-ass-trophies happen all the time and life continues to go on. (Me)
Really... after ALL that we went through the previous weeks and months to fix the debt ceiling... wringing our hands with worry... yelling at each other about what we should do... pointing fingers, throwing blame... we go through ALL of that... and the lemmings still run off the cliff.
I am really very close to cheering them on.
A graphic representation of why the market is tanking...based on just now figuring this out evidently: