BLACK WEDNESDAY: Stock Market Disaster of Biblical Proportions!

Posted on | August 11, 2010 | 36 Comments

OK, maybe a tad over-the-top there in the headline. As of 3:30 p.m., the Dow Jones Industrial Average was off about 260 points, but that’s not quite 2.5% of the index value, so it’s too early to expect stockbrokers to start jumping out windows in Lower Manhattan. See if you can’t spot the magic word here:

Stocks were deeply in the red Wednesday after the U.S. trade deficit widened unexpectedly and a string of weak economic reports from Asia and Europe heightened concerns that the global recovery is veering off track.

Also, the Democrats’ plan to fix the mortgage problem isn’t working. Unexpectedly!

UPDATE: While the private sector suffers, federal government employees are laughing all the way to the bank:

At a time when workers’ pay and benefits have stagnated, federal employees’ average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.
Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis.

That story was sent to me by a federal employee, BTW. They not only get paid more than we do, they have spare time to rub our noses in it.

UPDATE II: The DJIA closed 10,379, a loss of 265 points, while the S&P closed at 1089, down 32 points. And the latest news from D.C. is not really encouraging:

Government Plans More Aid for Jobless Homeowners
The Obama administration announced on Wednesday morning another round of direct assistance for unemployed homeowners at risk of foreclosure.
The aid, which totals $3 billion, comes against the backdrop of a weakening economy, stubbornly high unemployment and a housing market destabilized by millions of foreclosures.

Liberal logic: If what you’re doing isn’t working, do more of it!

UPDATE III: Michael Casey of the Wall Street Journal outlines certain misconceptions of globalization:

Right now the rest of the world should be buying U.S. exports. Instead, it is using the sickly U.S. consumer as a cheap fix for its own problems. The world is addicted to U.S. demand. With Wednesday’s surge in the dollar, we are feeding the addiction even more. Ultimately, as the U.S. economy weakens, so does everyone else.

Read the whole thing. Casey isn’t arguing for protectionism, but rather explaining why U.S. consumers — devastated by the collapse of the real-estate bubble — can’t be counted on as the driving engine for a global recovery.

UPDATE IV: Speaking of magic words:

Is There a Double-Dip Recession Coming? (CNBC)
“The perceived rising danger of a US double–dip recession, the risk of a hard landing in China and the threat of a financial or sovereign crisis in Europe . . .” (Market Watch)
“. . . the US economy is poised now on the cusp of a double– dip recession . . .” (Business Times)
” . . . the downside risk of a double–dip recession and a deflationary spiral has increased over the past few months . . .” (Financial Times)

Double-dip recession! Unexpectedly!

Category: Economics

Comments

36 Responses to “BLACK WEDNESDAY: Stock Market Disaster of Biblical Proportions!”

steveegg
August 11th, 2010 @ 7:40 pm

This bit of economic news is brought to you by Unexpected Analysts – If it ain’t rosy, it’s unexpected.
steveegg
August 11th, 2010 @ 3:40 pm

This bit of economic news is brought to you by Unexpected Analysts – If it ain’t rosy, it’s unexpected.
Joe
August 11th, 2010 @ 7:45 pm

The market went above 11,000, then has spent the last few months going up and down below that high. I am not sure if this is intentional churning anymore or instituional investors just having no where else to turn and going back to the market, only to be dispointed and leaving again.

But this does not look healthy.
Joe
August 11th, 2010 @ 3:45 pm

The market went above 11,000, then has spent the last few months going up and down below that high. I am not sure if this is intentional churning anymore or instituional investors just having no where else to turn and going back to the market, only to be dispointed and leaving again.

But this does not look healthy.
Rob
August 11th, 2010 @ 7:49 pm

Unexpectedly, I commented on your post. Anybody have and ideas whether or not oil will go above $100 a barrel by the year end? I thought it would after that moratorium but it hasn’t and we are done with the season of peak usage of it so…I think it can go down to $60 by winter. If that’s the case, I win the bet I made with my friend and hopefully I’ll get a job as an oil analyst 🙂
Rob
August 11th, 2010 @ 3:49 pm

Unexpectedly, I commented on your post. Anybody have and ideas whether or not oil will go above $100 a barrel by the year end? I thought it would after that moratorium but it hasn’t and we are done with the season of peak usage of it so…I think it can go down to $60 by winter. If that’s the case, I win the bet I made with my friend and hopefully I’ll get a job as an oil analyst 🙂
steveegg
August 11th, 2010 @ 8:04 pm

I’ll take the other side of that bet, Rob (if I had any money, that is).
steveegg
August 11th, 2010 @ 4:04 pm

I’ll take the other side of that bet, Rob (if I had any money, that is).
Rob
August 11th, 2010 @ 8:11 pm

Steveegg,
You think oil won’t go below $60?
Rob
August 11th, 2010 @ 4:11 pm

Steveegg,
You think oil won’t go below $60?
Joe
August 11th, 2010 @ 8:45 pm

I thought oil would go up too, but the sagging economy ended that happening. Still, I doubt oil will go below $65 or will go significantly above $85 (assuming the dollar doesn’t drop significantly in value). I suspect oil will fluculate in that 65-85 range (with typical seasonal influence) until it is clear the economy is picking up. Then oil will start to increase.
Joe
August 11th, 2010 @ 8:45 pm

That is almost a politician answer with all the hedging.
Joe
August 11th, 2010 @ 4:45 pm

I thought oil would go up too, but the sagging economy ended that happening. Still, I doubt oil will go below $65 or will go significantly above $85 (assuming the dollar doesn’t drop significantly in value). I suspect oil will fluculate in that 65-85 range (with typical seasonal influence) until it is clear the economy is picking up. Then oil will start to increase.
Joe
August 11th, 2010 @ 4:45 pm

That is almost a politician answer with all the hedging.
Robert Stacy McCain
August 11th, 2010 @ 9:00 pm

Of course, if Israel bombs Iran, Rob wins!
Robert Stacy McCain
August 11th, 2010 @ 5:00 pm

Of course, if Israel bombs Iran, Rob wins!
Live Free Or Die
August 11th, 2010 @ 9:22 pm

If Obamanomics proceeds with it’s EVIL plan, potential illegal aliens will start saying, “Por que hacer el viaje?”
Live Free Or Die
August 11th, 2010 @ 5:22 pm

If Obamanomics proceeds with it’s EVIL plan, potential illegal aliens will start saying, “Por que hacer el viaje?”
Rob
August 11th, 2010 @ 9:34 pm

Stacy,
That will be interesting scenario.
Rob
August 11th, 2010 @ 5:34 pm

Stacy,
That will be interesting scenario.
Rob
August 11th, 2010 @ 9:43 pm

Buy your puts, buy your calls before they bomb.
Rob
August 11th, 2010 @ 5:43 pm

Buy your puts, buy your calls before they bomb.
Adobe Walls
August 11th, 2010 @ 9:44 pm

I put Israel bombing Iran at 50/50 the economy improving in the next 12 months at zero. Today the Fed assured us it would take more steps to shore up the economy and the markets. The markets tanked, if I heard correctly every single stock sold on the DOW lost value. Should I be worried?
Adobe Walls
August 11th, 2010 @ 5:44 pm

I put Israel bombing Iran at 50/50 the economy improving in the next 12 months at zero. Today the Fed assured us it would take more steps to shore up the economy and the markets. The markets tanked, if I heard correctly every single stock sold on the DOW lost value. Should I be worried?
Joe
August 11th, 2010 @ 5:58 pm

I started to forget about Iran. But Israel has not. Neither have the Saudis, who are quietly siding with Israel on this one.
Joe
August 11th, 2010 @ 9:58 pm

I started to forget about Iran. But Israel has not. Neither have the Saudis, who are quietly siding with Israel on this one.
Spending their way out of a recession: Versailles DC is staying the course - Dateline Zero
August 11th, 2010 @ 6:33 pm

[…] Throughout the day, R.S. McCain kept a pretty good blow-by-blow of the market activity and the stupidity of what’s happening in socialist Washington. You can check out the initial post and the handful of updates at The Other McCain blog. […]
John S
August 11th, 2010 @ 10:49 pm

Hey, it’s now a buyer’s market.
John S
August 11th, 2010 @ 6:49 pm

Hey, it’s now a buyer’s market.
Make Mine A Double « The Camp Of The Saints
August 11th, 2010 @ 7:15 pm

[…] McCain is one of those fellows and his latest posting, while full of gloom and doom, is must reading. Can you say ‘Double-Dip […]
Bob Belvedere
August 11th, 2010 @ 11:19 pm

Uncertainty is the biggest threat to stability in most areas of life. This is especially true in high stakes gambling. And the stock market is just that. The Leftists in Washington have messed around in something they have absolutely zero understanding of, blithely enacting their unrealistic schemes without a care for the consequences. After all: they are the Illuminated Ones and, therefore, know best.
Bob Belvedere
August 11th, 2010 @ 7:19 pm

Uncertainty is the biggest threat to stability in most areas of life. This is especially true in high stakes gambling. And the stock market is just that. The Leftists in Washington have messed around in something they have absolutely zero understanding of, blithely enacting their unrealistic schemes without a care for the consequences. After all: they are the Illuminated Ones and, therefore, know best.
Estragon
August 12th, 2010 @ 6:07 am

Every day is a buying opportunity if you buy the right thing, but there is a lot more downside in the market now than upside, even though the recent trends had the Dow trading over the moving averages again, and the 50-day over the 200-day, which are positive technical signs.

Today’s close breached the 50-day moving average, though, and other measures like the RSI and MACD have been far too high to justify on the basis of the real world, which posits an imminent and sharp fall.

The world situation is also bad, especially China because the Reds always lie and present a positive outlook no matter what is really going on. If they are willing to show a slight contraction of manufacturing, it is probably in a state of crisis there for lack of world orders.

The Fed is proposing to transfer funds held in mortgage securities, as they mature, into federal instruments. IOW, we are going to be pumping billions and billions into our own debt. The likely reason for this is the anticipation that the combination of skyrocketing amounts of debt we’ll have to sell versus a falling demand will force interest rates up sharply. We HAVE to sell the bills to finance the debt, and there is very little wriggle room on the time window to do it. It’s that or start shutting down departments. The money must come from somewhere.

Now, the higher interest rates that the insane Obama spending spree would naturally cause would be a market reaction to his fumbling incompetence, but it will also strangle recovery at a most inconvenient time – 2012. So the Fed action in effect protects Obama and violates the independence they have tried to assert since Volcker.

It seems to me to be an attempt to manipulate interest rates to favor the incumbent Executive, and that is not acceptable.
Estragon
August 12th, 2010 @ 2:07 am

Every day is a buying opportunity if you buy the right thing, but there is a lot more downside in the market now than upside, even though the recent trends had the Dow trading over the moving averages again, and the 50-day over the 200-day, which are positive technical signs.

Today’s close breached the 50-day moving average, though, and other measures like the RSI and MACD have been far too high to justify on the basis of the real world, which posits an imminent and sharp fall.

The world situation is also bad, especially China because the Reds always lie and present a positive outlook no matter what is really going on. If they are willing to show a slight contraction of manufacturing, it is probably in a state of crisis there for lack of world orders.

The Fed is proposing to transfer funds held in mortgage securities, as they mature, into federal instruments. IOW, we are going to be pumping billions and billions into our own debt. The likely reason for this is the anticipation that the combination of skyrocketing amounts of debt we’ll have to sell versus a falling demand will force interest rates up sharply. We HAVE to sell the bills to finance the debt, and there is very little wriggle room on the time window to do it. It’s that or start shutting down departments. The money must come from somewhere.

Now, the higher interest rates that the insane Obama spending spree would naturally cause would be a market reaction to his fumbling incompetence, but it will also strangle recovery at a most inconvenient time – 2012. So the Fed action in effect protects Obama and violates the independence they have tried to assert since Volcker.

It seems to me to be an attempt to manipulate interest rates to favor the incumbent Executive, and that is not acceptable.
Adobe Walls
August 12th, 2010 @ 7:07 am

I don’t think they care if we find it acceptable or not.
Adobe Walls
August 12th, 2010 @ 3:07 am

I don’t think they care if we find it acceptable or not.