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Showing posts from October, 2008

No Soup Lines ... Yet?

On October 9th, 9:36am, Elizabeth MacDonald posted a blog entitled We are Not Headed for a Great Depression". The market was up slightly for the day, so perhaps she was feeling relieved. She stated that the market might "drift lower", but apparently felt that the market had made a bottom. As further evidence, she noted that we don't have an soup lines stretching around the block.

By the end of the day, the DJIA was off 7% for the day - 8.5% from when she posted her article. That doesn't feel much like "drifting lower" to me...

If we go back before the 90's boom, to 1992, the djia was at about 3300. Applying inflation and ~2% real market value gain (the long term average) - 6600 would have been a "rational expectation" in 1992 for the djia in 2008. We're standing at about 8600 - still about 23% over valued relative to that. How badly scared will people get if we just drop 23% more - forget about under-shooting the market's real…