Dow Drops More Than 200 Points

http://biz.yahoo.com/ap/060517/wall_street.html?.v=20 ^

[gipper81]

Smoot Hawley had nothing to do with the market crash or the depression.

You're right about the market (Hoover signed the act into law on June 17, 1930), but have no idea how you can make such a blanket statement about Smoot-Hawley's macro impact. Protective tariffs were going up all over around the world at the time. Large tariff increases have no impact on demand conditions within countries???

[Attention Surplus Disorder]

Well if you think there's a deval coming (I do, but I'm not going to try to convince anybody of anything) then cash aka green dollars is as "dangerous" as anything else.

In the classic sense, the two proactive options are to take on serious, productive (must be both of those) debt that you're absolutely sure you can service or go to precious metals. PMs is my particular choice. Notice I didn't say PM stocks. They are getting hammered as well. I know, I own plenty of them and too little physical metal. I've been buying 100 oz bricks of silver as my loose funds permit.

Speculatively, there are bond shorting and currency plays out there, but putting these on in the middle of a panic is likely not to work out too well.

[Old_Mil]

Well if you think there's a deval coming (I do, but I'm not going to try to convince anybody of anything) then cash aka green dollars is as "dangerous" as anything else.

If the dollar is to begin a serious slide, only commodities and investments denominated in foreign currencies will be safe harbors. It used to be that only foreign investors faced "exchange-rate risk." With the increasing amount of outsourcing and globalization, both domestic consumers and corporations face share in this risk.

[oceanview]

trade was tiny at that point in history, so its macro-economic impact would have been limited.

[trebb]

Higher energy costs, Fed raising rates from fear of inflation, correction from a really strong and steady climb over past few months. Some folks with lots of money taking the opportunity to maximize their profits then reinvest. Nothing to panic about.

[oceanview]

see post 57.

[Attention Surplus Disorder]

(almost) totally agree. The thing about foreign currencies is that they too have learned about the technology of the printing press and virtually all have grossly inflated in the past few years. Without supplying specific figures, witness the worldwide RE "boom" over the past few years. Totally out of control, everywhere. Why, for example, the Euro is strong when the economies are so relentlessly tepid over there is beyond me. (Let's save the whole euro-bashing thing, please)

Gold and silver = my answer.

[LS]

Not really panicking. But it is eerie how for 30 years no economist really looked at the connection between the Great Crash and the HS Tariff, then suddenly they found that it had all sorts of impacts---sort of a forest for the trees. I generally don't ascribe market movements to political events.

However, I think Charles Calomiris and I have proven that the Panic of 1857 was caused by bond-market reaction to the implications of the Dred Scott Decision (see our article in Journal of Economic History). So every once in a while we need to step back and assess whether it's JUST "market foces" that are causing some financial adjustments.

[neodad]

I hope that is instructive for those of you free-traders who learned economics from Ferris Bueller's Day Off

Yes, I did.

Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before? The Laffer Curve. Anyone know what this says? It says that at this point on the revenue curve, you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. "Voodoo" economics.

/sarc

[LS]

I know, and I know Milty. (Not well, but we've talked). His book, "Monetary History" is a classic. He's mostly right. But he can be mostly right that from 1921 on monetary policy sucked (exactly what I said in my book) and still not appreciate the impact of HS. What Doug Irwin did in his American Economic Review article (I think it's AER) is to COMBINE the two, and show that once you placed HS in the context of the ongoing devaluation caused by the Fed, it had an enormous impact, even more than Wanniski thought.

Irwin's calculations of the real-dollar impact of HS, adjusted for Milty's deflation, equald 5% of GNP. So there's room for both, but I think it's short sighted to immediately discount political factors with the market.

[OpusatFR]

I think we are looking at a competitive devaluation.

I know I'm getting slammed on Swiss francs and yen today.

OUCH....

[LurkingSince'98]

"What to do"

Mortgage your house and kids and buy gold and silver bullion and strap your family in we are in for a bumpy ride.

Lurking'

[OpusatFR]

What was that? Mortgage the kids? Who'd want them anyhow?

(Black humor while watching the tick...)

[LurkingSince'98]

"I think we are looking at a competitive devaluation"

right-o!!!

and they are ALL devaluating against.........GOLD

Lurking'

[OpusatFR]

There's a rumor flying around that two hedge funds are being liquidated..

You hearing anything?

[Attention Surplus Disorder]

Nothing heard here, but I'm not high enough on any food chain to know.

It wouldn't surprise me in the least, and the thing is, with the way the market is utterly dominated by a few thousand hedgies who all run the same way at the same time and 55-70% program trading, interspersed with brute force Fed intervention....there are bound to be many more hedgies getting clocked; eg, not just two. (insert cockroach analogy here)

[Attention Surplus Disorder]

Yeah, this is why I can't endorse the "move to XXX currency" call, because EVERY gov't has taken Bernanke/Greenspan lessons. The gold/silver thing can't be overthought. It's just a straight long play, one that I am glad I finally found, where one can be a straight long, not look at the market for a day or month or year and know it will at minimum preserve one's purchasing power.

[Matchett-PI]

This time last year (and the year before, and the year before, and the year before and....)

May 2, 2005

Worst six months on tap?
A choppy market worried about inflation and interest rates now has another issue: seasonal weakness. By Alexandra Twin, CNN/Money Staff Writer
http://money.cnn.com/2005/04/29/markets/worstsixmonths/index.htm

NEW YORK (CNN/Money) - You think the stock market's been troubling lately? Get ready for what's often the worst six months of the year.

The period from May 1 through Oct. 31 is usually not so great for stocks, as the old Wall Street saw "sell in May and go away" tells you.

But followers of the hemline indicator, the Super Bowl indicator and the dreaded Shaq curse will also tell you that these so-called Wall Street indicators are suspect. The trends can sometimes be chalked up to coincidence and they typically analyze too few years to be relevant statistically.

Still, as indicators go "the seasonal tendencies can provide a good backdrop," said Ed Clissold, senior global analyst at Ned Davis Research. "But they have to be taken within the context of whatever else is going on in the market."

And to be sure, many of the issues that are troubling investors are unlikely to just go away anytime soon.
Click here for the earnings scorecard.

Those include the slowdown in economic growth, the commensurate deceleration in corporate earnings growth, the steady rise in short-term interest rates, and -- oh yeah -- soaring prices for oil and other commodities that have pushed up the pace of inflation. (For more on whether "stagflation" is making a comeback, click here.)
The best of times ...

To demonstrate the strength of the November through April period versus May through October, the Stock Trader's Almanac tracks the gains you'd see if you invested $10,000 in the Dow industrials on Nov. 1 of each year and then sold April 30.

If you'd done that every year since 1950, you'd have earned $492,060 on a $10,000 investment, according to the Almanac. But if you'd reversed the whole process, and invested the compounded $10,000 during the May-October period, after 54 years you would have ended up with a $318 loss.

For the S&P, the gains would be $349,165 over the 54 years during the "best" six months and gains of $7,102 during the "worst" six months.

Of course, it seems perfectly logical that if the last six months weren't so great for the market, the next six might not be so bad. But does that mean a pickup is ahead for stocks?

The current strong months for the market, measured by the "Sell in May" indicator, ended Friday, with a whopping 0.4 percent gain for the Dow, and a 1 percent rise in the S&P 500.

But seasonal factors are always going to be in play to some extent, since that's a function of the "habitual behavior of society, which extends to stocks," said Jeffrey Hirsch, president and editor of the Hirsch organization, which publishes the Stock Trader's Almanac.
... and the worst of times

The second quarter, which starts in April, tends to be weaker, as the positive effects of holiday bonuses and the holiday retail sales period fade out, and a "spring cleaning" mentality kicks in, Hirsch said.

As summer rolls around, people would rather be spending less time in the office and more time enjoying the weather. That change in psychology often extends to the market as well, Hirsch said, with lower trading volume and more rangebound markets.

When the fall creeps in, the psychology switches to getting back to school and back to work and, from a stock standpoint, to cleaning house. To that end, September is traditionally the biggest loser on a percentage basis for the Dow, S&P 500 and Nasdaq.

October, which starts the fourth quarter, can be tough at the beginning but usually turns around by month end, and the quarter as a whole tends to be more upbeat, especially once work bonuses and the holiday sales period kick in.
Bulls destined to be beached?

So will this year be any different? The Fed is expected to keep raising short-term rates when the central bank's policy-makers meet Tuesday, due to the pressures from higher energy prices and other inflationary trends.

Meanwhile, as the recent weak retail sales and slide in first-quarter GDP growth make clear, fears about an economic slowdown are not unfounded.

But some market pros said stocks are more likely to churn over this period, rather than fall much.

And some are looking for something a little better.

As the months wear on, and "investors realize that the economic growth will slow, but not halt, and that the consumer is not tapped out, stocks may be able to move a bit higher," said Jon Brorson, head of growth equities at Neuberger Berman. Top of page

*
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May brings start of worst six months for stocks. - May. 2, 2005
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Sell in May and go away.
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[snip]

[rightinthemiddle]

The Media is Rejoicing!

"Concerns over the economy...inflation fears..."

Jeez.

[GOPJ]

Do you think it's '29 all over again?