Hey look at the Dow..

[KuroKensaki]

It's not even noon and the DJIA has dropped 40 points. That's on top of its impressive 160 point plummet yesterday. Is this a small-time scare? Or is the economy on its way to a bigtime correction?

[DenverDem]

1. Massive correction.

The previous correction was hardly realistic. This bounce has been engineered by the Power Elite but reality is an unforgiving taskmistress.

[Warpy]

7. Agreed

The P/E ratio today is at an all time high, which means that the stock market continues to be severely inflated, the one thing that Bush's tax cuts to the investor class accomplished. The stock prices are being held up mostly by hot air and wishful thinking....and a massive infusion of funny money from the government via the wealthy. There was simply no other place for those tax breaks to go, since the consumer economy is stagnant and no wealthy person in his right mind is going to dole busywork jobs out as charity projects unless they are going to his relatives.

A massive correction is desperately needed and it is inevitable. Hold on to your hair, folks, it's going to get a bit bumpy when it does, although I doubt it will be allowed to occur before next November.

[mastein]

8. Where do you get a marketwide P/E ratio?

[DenverDem]

10. Yawn.

Keep pouring your money in there, if you wish.

[redqueen]

2. Why was the dollar getting stronger yesterday?

The market was down, but the dollar was going up... how does this work? (And nevermind and thanks anyway if it's too complex for a short explanation.)

[54anickel]

20. The dollar value is set in the Forex currency exchange markets, and

those have not been running on fundamentals because of the Bank of Japan's intervention. The BoJ sells Yen to buy US$ to keep the dollar up and the yen down. In the last week or so they have also been intervening in the Euro, Pound and Australian currencies as well.

Japan wants to keep the yen low to help their export markets. Their main competitor to the US market is China. China's yuan is pegged to the dollar at a fixed rate. The yen floats, if it is allowed to get too high in value their exports become more expensive than Chinese exports for us to buy.

That's the simple explanation. The interesting part is that Japan is expected to back off on intervening in the markets at the end of their fiscal year (ends this month). They will still intervene to slow the rise in the yen, just not as agressively as they have been. That means the dollar will drop, how far and fast is anyone's guess, but they probably won't be buying as many treasury notes and bonds as they have been.

[redqueen]

21. Thanks for the explanation

I knew Japan was buying dollars, but not that the effect was that significant.

[meegbear]

3. When I was your age ...

the Dow would always drop whenever * would make a televised (CNN,MSNBC,etc) speech. Has he been on the air?

[MUAD_DIB]

5. Yesterday *'s piehole was open.

Hi meegbear.

[rocktivity]

4. Bush must be making a speech

Remember how they'd show him speaking along with the stock numbers plummeting? Someone here complained, "Every time Bush opens his piehole, the stocks drop!" And the term "The Piehole Effect" was born!

:headbang:
rocknation

[arcane1]

14. we used to occasionaly have a pie-hole alert here

maybe that just became such a regular occurance that it's no longer novel... It's a given, now, as immutable as gravity

[newscaster]

6. Yikes! If this is a correction.....

the mistake must have been a whopper!

[stepnw1f]

9. Hello All

I was wondering if the Dow, due to political pressure, is going to fall slowly over the course of time rather than sharply?

[mastein]

11. I think you have this backward

If there was Republican political pressure on the market to look good, it would fall sharply in the near term (let's say through August, give or take) and then bounce back in the period from a time just before the RNC at the end of August/beginning of Sept. through the election where, it would be about where bounce back it is now, (or was last week) give or take. That way, on election day the Repubs could say they have "grown the economy" it is "rebounding" etc.

[stepnw1f]

12. So you are saying

that it will fall sharply. Let's exclude any political persuasion. Is the economy being held up by optimistic and skewed projections? If so, would such projections make our middle class and poor classes more susceptible to poverty?

[mastein]

17. Optimism and pessimism

To take a step back (with the exception of short selling, which accounts for about 10 or so % of the market), every stock deal is one person saying "I have made enough" or "I need to cut my losses" and the other person on the other end saying "Hey, this thing can still go up further". So in that way about half the market is always optimistic. That is one reason to look at volume or the number shares trading hands in a given period of time.

When volume goes down and prices go down you very few of the second type of quotes out there. That happenened in the heart of the 00-02 downturn, and most every other major downturn (e.g. 72-74 and the great depression) over the last century or so.

So on some level, yes the market is all one big confidence game. So if confidence on wall street went down we would have a big problem, in general, which is what happened in the great depression.

Now there are procedures in place to stem the rapid crashes we saw in both 1929 and 1987. After 1929, they said "This cannot happen again" and built in protections against margins being too great, which caused the house of cards to fall then.

In 87, they instituted trading curbs that stocks cannot be traded beyond a certain range in a certain amount of time, as electronic programs were moving the market wildly. So now in order to wring out the fat, it takes days or weeks, not just a couple of hours, which also avoids the feeding frenzies that happened in the wake of the crashes.

As to how this would hurt the middle class, that is a huge debate, as most folks who are middle class do hold some share in the market, but do not look at it for their livelyhood, but rather as a long term wealth building machine that they use for long term goals, particularly their 401(k) accounts. So, it will increase time worked by those closest to retirement, if they have chosen (misguidedly so) to invest heavily in stocks close to retirement.

The other side is the companies themselves and their overall health, and their compensation of employees. Which gets back to the jobs issue... another discussion entirely.

Hope this helps.

[bemildred]

13. Hard to say.

160 as such is not all that impressive.
Much bigger swings back at the end of the bubble.
Volatility still seems pretty low.
Two or three such in a row should wake everybody up, though.

[stepnw1f]

15. DOW DOWN 110 points

[West Coast Democrat]

16. Yep. Another 185 pts, and were back below 10,000

It could very well happen.

[stepnw1f]

18. Dow Down 137

[stepnw1f]

19. Dow down 174