Categories: Andrew Coyne, Capital Read

LATEST STOCK MARKET SHOCKER!!!!

by Andrew Coyne on Wednesday, October 8, 2008 11:42pm - 50 Comments

The Dow Jones industrial average is down one-third from its high a year ago.

How does that compare with previous downturns?

The stock market lost almost 90 percent of its value during the Great Depression. During the most recent bear market, which lasted from March 2000 to October 2002, the market lost about 50 percent.

Since 1926, there have been 18 bear markets, a situation usually declared when a stock index drops more than 20 percent from its previous peak.

During the average bear market, the Standard & Poor’s 500 index has declined 36 percent, according to the Leuthold Group, a Minneapolis investment firm.

Coincidentally, on Tuesday the S&P 500 was down 36 percent from its high on Oct. 9, 2007.

[via ScrippsNews]

When will this Prime Minister do something show he cares about this unprecedented collapse more or less average decline in stock prices?

Tags: Election Watch, financial crisis

More by Andrew Coyne

kody

Now I’m just plain starting to feel bad about how hard I’ve been on Andrew, low these lase few months.

He’s seemingly the lone voice of sanity these days.
Style

The stock market may be reacting to the credit crisis and not, in itself, be the story. For what it’s worth, you could look at the daily spread between the Canada bank rate and the 1-month commercial paper rate. Since 1998, the commercial paper rate had never been as much as 35 bp above the bank rate – until August 2007. During the past month, this spread has regularly hit record highs (43 bp on Sept. 14, 45 bp on Sept. 17, 50 bp on Oct. 2, 53 bp on Oct. 3). I think this is plausible evidence of the credit crunch hitting Canada.
http://andrewcoyne.com Andrew Coyne

Don’t worry, Kody, I’ll disappoint you again soon.
kody

heh
http://www.strategicvoting.ca strategic voting

I think a question will arise sooner or later: why did Mr. Harper decide to go for the election when he did? Was it the blinding light of the possibility of a majority government that flashed into his eyes with the 40% polls was giving him? Did he as an economist realized that the economic outlook is not looking very nice and it doom from here on when it comes to the Tories fortunes? It sure looks like the conservatives with their ideology first, common sense another day, are the worst thing that could happen to a stable economy.
Jack Mitchell

Mr. Coyne, I couldn’t agree with you more about the insipidity of the opposition’s rhetoric (esp. during the English-language debate), but in all honesty isn’t this part of the political game? So why is the PM playing checkers here? All it would take would be a few vague, descriptive sentences of how “times are tough, but we’ll all stick together as a nation” etc. I’d rank morale-boosting pretty high on the list of a general’s responsibilities, even if he has to sing a few songs in drag to achieve it.
http://scottdiatribe.gluemeat.com Scott Tribe

Ah, but he did attempt a morale-booster, with that inspiring line about how this needless panic had spurred some great buying opportunities in the markets.

I mean.. how much more empathy do you need?

Oh wait.. that didn’t work out too well.. so he’s now using his mother as a political prop to make him Mr. Sweater Guy again.
Dot

Well, at least Kody is not predicting where the Dow and TSX will be in the next few days…yet.
Jody

Anybody aware of the characteristics of clinical psychopathy?

“Some researchers have commented that psychopaths ‘know the words but not the music,’ a statement that accurately captures their cold and empty core. This hollow core serves them well, though, by making them effective human predators. Not only are psychopaths unconcerned about the impact of their own behavior on others — or of possible retribution — they more often than not will blame their victim if they are caught.”

– from Snakes in Suits: When Psychopaths Go to Work, by Paul Babiak and Robert D. Hare
http://www.amazon.ca/Snakes-Suits-When-Psychopaths-Work/dp/0060837721
Geiseric the Lame

How long do we get to pretend this problem is isolated to the world of high finance?
Sisyphus

You’re right. Nothing here. Or there.
Last year’s masters of the universe are having self-esteem issues this year. That’s all.
Andrew Potter

Funny, the version of the story my computer showed me had a few more lines after the passage quoted here:

***
If this was an average bear market, it would be over by now.

But given the severity of the financial crisis, many observers say the current bear will look more like Ursa Major than Ursa Minor.

“I am inclined to think this would be deeper than an average bear market,” says Paul Krsek, chief investment officer of K&A Asset Management in Napa, Calif. “We keep getting surprised by the depth and breadth of this problem. Every day we turn a new page in this book, and every day there’s a nasty surprise on the next page.”
kody

10,211

and

11,303

respectively.

Cheers.
Francien Verhoeven

Here’s hoping that rural properties in southern France will plummet in value. Soon! I might decide to hang out there for a while. Can’t understand french all that well, so that would be a bonus to the well being of the brain.
http://mikewatkins.ca/2008/10/08/harper-government-running-deficit-now/ Michael Watkins

Ah, trust the lay folks to quote a few stats and declare the problem over. Such casual treatment of the situation at hand is likely reflected in your portfolio statements.

But recognize the irony here: you’ve accused politicians of overstating an issue and here you are understating the issue with puerile alacrity.

Do not confuse a bounce (which under normal circumstances would have happened days and many points ago) with a bottom. Equity markets are overdue for some lift here yet despite throwing the kitchen sink at them – bailout packages galore, rate cuts, shorting bans, nationalizing some of the worst performers… well the list goes on and on and still markets have been unable to return to anything resembling an orderly state. There is a reason for that. These are not “average” times or declines.

I’ll say it again: do not confuse a bounce with a bottom, and remember, the market is a forward leaning indicator. There is much more pain ahead on both sides of the border.
d. andy jette

Not to burst your bubble, Andrew, but if the Dow was the only problem then we wouldn’t be talking about it. But it’s not about the Dow. It’s about Moscow having to shut trading down at least 3 times in the past 2 weeks alone, it’s about the run on money market funds that briefly scared the hell out of central bank around the world, it’s about the reports out of the US of tight credit affecting access to car loans and mortgages, it’s about UK banks going under, and (today at least) it’s about our Big 5 banks rebelling against the central bank rate cut action.

The reason people got their backs up over Harper talking about buying opportunities is that the stock market madness this weel is only one small part of the story. He was missing the point. And I think you know that. You’re a very bright guy who knows his way around the wonderful world of macroeconomics. The fact that what Harper said was accurate doesn’t matter. Many people are worried about what’s coming, not just about what’s happened over the past couple of weeks, or months, or year.
Francien Verhoeven

Oh, and I would like to observe how the authentic French do it their way!
Sophie

Look, I’m not an economist. Nor do I own stocks. But,as an earner of 7.75@hour and a single parent and student, I probably qualify as ‘ordinary’.
And I am scared. Scared of losing my job.
Although Coyne tells me I have nothing to fear
Geiseric the Lame

its not his fault if you become a market correction
http://andrewcoyne.com Andrew Coyne

Potter,

And further down from that are people saying the market has bottomed out. In other words, the same story that stock market columnists write every single day of their lives: “Some people think the market might go down. On the other hand, some think it might go up.”

All we know is where the stock market has gone. Nobody knows where it’s going.
Sophie

Can someone kindly explain to me what this actually means?
Forgive me for my ignorance, but how do fluctations in the stock market affect us lesser mmortals?
Geiseric the Lame

Aside from initial public offerings, which allow companies to raise capital, the markets is where the captains of industry park their money when they’re not really using it.

What it means is a whole bunch of numbers that sooner or later might have been cashed out of the market and turned into investment in something real for a change are missing in action.

What it means is a few bruised egos for important people and a slowdown for everybody else.
Sophie

Thats what i figured, thanks.:)
noone I’ve met has yet been zble to ”define’lowdown, though.
And there is nothing scarier than the unknown.
Sophie

*slowdown*
Geiseric the Lame

Its a reference to the speed of doing business.

Think of renovating your house. If you think you’ll have the cash coming in to pay for it you’ll do it quick as you can. If you think you’re budget might not handle it, you slow down.