Once again... if you don't care, don't click on the post (I mean... come on... I gave you fair warning).
Last fall I said that we had experienced a severe economic earthquake and the full ramifications were not yet known.
The picture becomes a little clearer... but still much is in doubt.
Yesterday the DOW closed at a six year low of 7,465.95. In 2002, the lowest level that the Dow hit was 7,286.27.
If the DOW slides below that 2002 level, it will have fallen back to 1997 levels, making it a lost decade for DOW investors (not counting dividends).
It brings to mind former US Federal Reserve Board Chairman Alan Greenspan's speech of December 5, 1996. Speaking to the American Enterprise Institute during the stock market boom of the 1990s, Greenspan made his infamous 'irrational exuberance' comment.
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
The phrase was interpreted by financial pundits as a typically cryptic warning that the market might be overvalued.
And where was the DOW on December 5, 1996? It closed that day at 6,437.
Twelve years later the market may well be on it's way to finally wiping out those years of 'irrational exuberance' Greenspan referred to and, in the process, taking out all the years that have come afterwards.
Is a DOW of 5,000 out of the question?
As for real estate, earlier this week we had the chief economist of the BC real estate association (Cameron Muir) calling this a great time to buy.
Uh-huh.
I wonder if he caught the front page of the Washington Post newspaper?
"Markets around the world plunged Tuesday as evidence mounted that the global economic crisis is worsening. Japan is suffering it's worse downturn in 35 years. The British economy is facing it's sharpest decline in 30 years. Germany is slumping at it's worse pace in 20 years. Meanwhile the job market in the United States, at the epic-centre of the world downturn, is at it's worse in decades. And emerging economies are contracting at a pace few had predicted just months ago. Even China, whose economy is still growing at 6.8% annual pace is grappling and grasping with vast numbers of the unemployed, raising fears of unrest. The sharpness of the global showdown has alarmed economists who see no obvious engine for recovery. Most Western developed economies are going to see the deepest downturn they have seen in a number of decades, in some cases, possibly, since the Second World War."
Last night Charlie Rose called it 'scary stuff'.
Yet Cameron Muir calls it a great time to buy.
Uh-huh.
Last fall I said that we had experienced a severe economic earthquake and the full ramifications were not yet known.
The picture becomes a little clearer... but still much is in doubt.
Yesterday the DOW closed at a six year low of 7,465.95. In 2002, the lowest level that the Dow hit was 7,286.27.
If the DOW slides below that 2002 level, it will have fallen back to 1997 levels, making it a lost decade for DOW investors (not counting dividends).
It brings to mind former US Federal Reserve Board Chairman Alan Greenspan's speech of December 5, 1996. Speaking to the American Enterprise Institute during the stock market boom of the 1990s, Greenspan made his infamous 'irrational exuberance' comment.
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
The phrase was interpreted by financial pundits as a typically cryptic warning that the market might be overvalued.
And where was the DOW on December 5, 1996? It closed that day at 6,437.
Twelve years later the market may well be on it's way to finally wiping out those years of 'irrational exuberance' Greenspan referred to and, in the process, taking out all the years that have come afterwards.
Is a DOW of 5,000 out of the question?
As for real estate, earlier this week we had the chief economist of the BC real estate association (Cameron Muir) calling this a great time to buy.
Uh-huh.
I wonder if he caught the front page of the Washington Post newspaper?
"Markets around the world plunged Tuesday as evidence mounted that the global economic crisis is worsening. Japan is suffering it's worse downturn in 35 years. The British economy is facing it's sharpest decline in 30 years. Germany is slumping at it's worse pace in 20 years. Meanwhile the job market in the United States, at the epic-centre of the world downturn, is at it's worse in decades. And emerging economies are contracting at a pace few had predicted just months ago. Even China, whose economy is still growing at 6.8% annual pace is grappling and grasping with vast numbers of the unemployed, raising fears of unrest. The sharpness of the global showdown has alarmed economists who see no obvious engine for recovery. Most Western developed economies are going to see the deepest downturn they have seen in a number of decades, in some cases, possibly, since the Second World War."
Last night Charlie Rose called it 'scary stuff'.
Yet Cameron Muir calls it a great time to buy.
Uh-huh.
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