Solarbird (solarbird) wrote,
Solarbird
solarbird

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The American lost decade

Good afternoon.

The S&P 500 - the broadest of the American stock indices - cleared its 2002 lows today, which is to say, fell below the lowest point it reached during the 2001-2003 bear market. We are now, at least for the moment, back to mid-1997 levels in that index, and this is officially the worst year in the history of the S&P 500 index. The S&P 500 has lost 52% of its value from peak. (SPX today -54.14, -6.7%).

The Dow Jones Industrial Index (down 5.6%) has not yet cleared its 2002 lows, but closed the day sitting on support virtually identical to the Cloud City antenna I mentioned in the previous update, and you see how well that held up. The NASDAQ, down only 5.1%, has a little more pad than that before it breaks south of 2002.

The US has already lost a decade, and the first phase of this isn't over yet. RGE Monitor notes (unlinkably, which annoys me), "...Nouriel Roubini expects a doubling to $2 trillion writedowns with according capital raising requirements as house prices have to fall another 15-20%... we're only half-way through." But the second phase is already ramping up, as unemployment claims are soaring. Nicholas Bloom at RGE Monitor thinks 2009 will be a "nightmare on main street" but that recovery is possible in 2010 - if intervention doesn't choke markets. Otherwise it will extend longer.

All that said, I'd think you'd have to have a snapback rally at some point very soon, just because of the general nature of the market. Too bad that's not bankable.

Bloomberg is announcing that the H.4 report from the Fed ("Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks") due out today is delayed. Indefinitely. (No link, sorry.) Freddie Mac is suspending all foreclosure sales of occupied homes until January 9, 2009. Marketwatch adds unlinkably that Fannie Mae is doing the same thing... oh wait, it's linkable now. It smells like something is going on here, but whatever it is, it's pretty opaque.

Mish has commentary on record-low treasury yields, and collapses in swap spreads. He also says that the Fed is out of room and that rates are already effectively at zero; I think they're effectively at .35, and yes, that's only the discount window, and all these other devices - trillions worth - are at zero, but the discount rate is the benchmark rate and does affect other things. Not that a third of a percent or so is going to have a huge impact.

You gotta be seriously brave or seriously stupid to try an IPO in this climate. But hey, if after a day like this you can be down only 15¢ a share from your initial offer, you're not doing too badly. They were one of the few stocks technically up today, as they opened at $10 ($2 below their offer) and rose to $11.85. In this climate, that's not bad.

In helpful news, oil continues to fall, closing at $49.62/barrel as economic activity augers in. Silver linings and all that. The Yen continues to soar against all currencies, somehow pulling the US dollar up with it. I still don't get that. It has to be T-bill purchases (with deficits at record highs) but c'mon.

And in crazy news, the Vatican says the current Pope had a vision of this in 1985. Yay?
Tags: economics
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