Wall Street

[MMI]

First of all, if it's dollars you want to count, the day the Dow dropped 777 points, the value of the companies listed on Wall Street fell by more than a trillion dollars. That's more than had ever before in a single day too. So, points, or value of quoted corporations in dollars, it was a record fall. Maybe my perspective is a little wrong, but I think that it's telling us that something serious is happening, and it would be burying your head in the sand to ignore it. If the percentage drop was only 7%, and there have been larger falls on rare occasions before, it's still far more in a day than is normal.

And, besides, as DrBuzzCzar usefully points out, we are looking at the wrong index if we are watching the Dow. Its current volatility is being caused by the fact that there's not enough hard cash or available credit to allow ordinary commerce and trade to proceed. The banks that have folded weren't insolvent as such, they just ran out of liquid funds. That's why all the central banks have been pouring extra money into the markets and making emergency lines of credit available. When the Dow falls these days, it's because it's writing off the businesses that don't have enough liquid funds left and can't borrow more.

Then along come Barclays, BankAmerica and others of that ilk to pick over the remains. If these predators survive, they'll have picked up valuable assets for a song. But there's a good chance they won't because Congress has said that now the sick must cure the sick, ignoring the possibility that there could be a financial plague out there.

Comrade Bush wanted to inject his $700bn as a temporary palliative: it wasn't a cure. It was just one dose, and it might not have been enough. But one way or another, he'll have to do something eventually.

Otherwise, as I said before, it's higher interest rates, stagflation, bankruptcies and rec-/depr-ession.

[Ragoczy]

First of all, if it's dollars you want to count, the day the Dow dropped 777 points, the value of the companies listed on Wall Street fell by more than a trillion dollars. That's more than had ever before in a single day too. So, points, or value of quoted corporations in dollars, it was a record fall. Maybe my perspective is a little wrong, but I think that it's telling us that something serious is happening, and it would be burying your head in the sand to ignore it. If the percentage drop was only 7%, and there have been larger falls on rare occasions before, it's still far more in a day than is normal.

There's also more total dollars invested than in '87. I was simply pointing out that that particular event was not so significant as it's being reported. If someone making $1000 a month takes a 20% hit ($200) it's of more overall significance than someone making $10,000 a month taking a 10% loss ($1000), even though the "dollars" are greater.

What I was trying to get across is that, although it's a large drop, it isn't as though the market hasn't taken, and recovered from, drops as or more statistically significant. Trying to point out that the media, in their choice of what to report and how to report it, can influence the story and people's reaction to it.

People's reaction and confidence in the economy, already low and justifiably so, is going to be different to hearing "almost as bad as 1987" than to hearing "worst in history".

This same irresponsible journalism permeates much of the reporting about the current situation. Congress is being flooded with calls to oppose the plan because it's being reported as $700 billion or more cost. Few are reporting that much of what that money would go to would be to take on the high-risk securities -- much of which consists of real-estate. It isn't being reported that the government would then own that real-estate and would recoup some of the initial cost.

None of this means that I don't think there's a problem or that something shouldn't be done, just that it's typically best to assess the actual facts instead of reacting in a panic.

You may be taking all of your money out of the bank; I, today, moved all of my cash and bond money to stocks. I'll probably show a loss tomorrow and the next day and even next week, but I'm thirty years from retirement and someone who bought a shitload the day after Black Monday and held it is in a pretty good position today, even after the drop. If I have no confidence that the value of a diversified portfolio of stocks will be much, much higher twenty years from now, then the alternative vehicle isn't cash -- it's guns and bullets.