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Great Depression Online Archive Issue:

This Week's Mantra

Great Depression Online
Long Beach, CA
October 02, 2009

Inside This Issue You Will Discover…

*** Punishing the True Believers
*** Four Straight Quarters of Decline
*** This Week’s Mantra
*** And More

Punishing the True Believers

The stock market stumbled to the third quarter finish line on Wednesday with the DOW dropping 29.92 points.  Nonetheless, the DOW closed out the quarter with a 15 percent gain…its best performance in nearly 11 years.

‘“Any legitimate decline in the market is just seen as a buying opportunity,’ said David Waddell, senior investment strategist and CEO of Waddell & Associates,” and reported by AP.  ‘“That pattern has continued now ever since the rally began.”’

Such patterns, of course, are always true until just the moment they aren’t.  We don’t know when exactly that will be.  We are certain, however, that this pattern will eventually break.  For it’s a bear market.  And bear market rallies always punish the true believers.

~~~~~~Feel 20 Years Younger~~~~~~

Don’t settle for “golden years” when your “glory years” are still waiting for you.  How can these folks defy aging while you keep getting older every day?

Turn Back the Clock 

~~~~~~~~~~~~~~~~~~~~~~~~~

Moreover, this bear market rally has been long and vigorous.  We hope you enjoy it while it lasts.  We think it could end any day; perhaps it already has.

Here’s why…

The DOW is up 48 percent from its March 9th low.  The market’s rally is also approaching seven months in duration.  Following the initial crash in late 1929 the market rallied 48.1 percent over a period of five months.  Then it crashed 89.2 percent from its initial high.

By this account, stocks are overdue for a fall.  Maybe it won’t be as impressive as 80 years ago.  But we are confident it will be painful.

Four Straight Quarters of Decline

The economy only shrank 0.7 percent in the second quarter, reported the Commerce Department on Wednesday.  This is a notable improvement over the 6.4 percent annualized contraction during the first quarter of the year and 5.4 percent annual rate of decline in last year’s final quarter. 

Yet, while a 0.7 percent decline is an improvement…

“The economy has now contracted for four straight quarters for the first time on records dating to 1947,” reported AP.  “Economic activity shrank 3.8 percent since the second quarter of last year, marking the worst recession since the 1930’s.”

But not to worry.  Economists have projected that the economy grew at a rate of 3 percent in the third quarter.

“Many economists say consumers likely came back to life in the third quarter, boosting spending at around a 2 percent pace.  If they are right, it would be the strongest showing since the first quarter of 2007, before the recession began.”

Still, while the economic growth rate may have been 3 percent, stocks gained 15 percent.  In other words, stock prices increased 5 times faster than economic growth.  This in our opinion is another reason the stock market may be in for a fall.

This Week’s Mantra

Yesterday the market paused for a reality check.  Looking in the mirror it saw a worn-out, over encumbered, pile of economic rubble.  The Labor Department didn’t help…they reported that new claims for jobless benefits rose last week to 551,000.

Then someone on Wall Street screamed…Sell!

And so it was…

The DOW dropped over 2 percent and the S&P500 dropped over 2.5 percent.

Today we’ll learn the unemployment rate for September.  Anything over 180,000 job losses could push the stock market over the ledge.

On Tuesday we commented on oil’s drop in price and the stock market’s subsequent drop last week.  This week the mantra has been: stocks down, oil up.

What does it mean?  We don’t know.  But we’ll keep one eye on oil and the other on stocks…in earnest, and interest, always looking for an answer.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  What would you do to feel 20 years younger – with plenty of energy, unmatched interest in life, and the renewed ability to achieve all the life goals you’ve written off, bit by bit, with each passing year?

Your Health is Your Best Investment

 

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