Dow 7000?

Back on October 6, I predicted – well sort of predicted by writing a headline on some market news aggregation – Dow 8,000.  Based on the economic and financial industry news of that day just 2 1/2 months ago (seems longer) the Dow dropping to 8,000 and staying in that vicinity for some period of time seemed reasonable.

At the time we had been through Fannie and Freddie, Lehman was failing, more banks were failing and the federal government and media began explaining things like credit default swaps to America.  Things looked bad, but some were still touting the “fundamentals” of the U.S. economy and the publicly traded companies on our major stock exchanges shouldn’t pay too high a price (with dropping share values) for the excesses of the financial services industry.  Also at that time, I was reading Kevin Phillps’ book, Bad Money.  If you want a better understanding than the average bear – or bull – of the current U.S. financial system Bad Money is a must read.  At any rate, under the influence of that book, it was just obvious that as stocks dropped sharply that day there were probably many more shoes to drop, hence the market wasn’t at the bottom yet.

Now I’ll revise my estimate.  On top of the crisis in the financial system and all that it entails, from failing banks to a still too tight credit market there are many more economic indicators pointing to the final quarter of 2008 just being the beginning of a difficult economic downturn.  Here are a few things that immediately come to mind: Read more

Krugman Wins Nobel Prize

Congratulations today to Princeton Prof. Paul Krugman for winning the Nobel Prize for Economics.  Through his columns in the New York Times since 1999, Krugman has clearly and succinctly explained an increasingly complex economy in ways that are easy to grasp and meaningful to those of us not steeped in the vocabulary and process of today’s markets and the economy.

Here in the dwindling American middle-class we’ve all known that things are different, the prospects for the American Dream have become elusive.  Krugman has had an uncanny ability to understand this at a high level and explain it at a broad level. 

Krugman has become so well-known in the mainstream and new media for his abilities that we sometimes forget that his day job is “Professor.”  Academics get a bad wrap for living in “Ivory Towers.”  Krugman on the other hand has done the public a service by translating his Ivy League intellect into the language of us all.  His Nobel is a reminder to me that there is an accomplished theorist behind the Times columns and appearances on Countdown with Keith Olbermann.

Perhaps Krugman’s greatest accomplishment, when all is said and done, will not be the Nobel-quality academic work.  It may end up being his ability to translate a transformational economy to the rest of us.  What I’m going to do in honor of Krugman’s Nobel is see if I can continue my Economics self-education by understanding more of what he’s accomplished in academia.

Some of Krugman’s Recent Work in the New York Times:

• The Conscience of a Liberal (Blog)
• Op-Ed: Cash for Trash – New York Times, September 21
• Op-Ed: The 3 a.m. call - New York Times, September 28
• Op-Ed: Moment of truth – New York Times, October 10

Transcript: President Bush Statement on Bailout Failure

(Source: White House Press Office)

7:34 A.M. EDT

THE PRESIDENT: Good morning. Yesterday, leaders here in Washington reached an extraordinary agreement to deal with an extraordinary problem in our economy. Working closely with my administration, congressional leaders from both parties produced the Emergency Economic Stabilization Act — a bold bill that will help keep the crisis in our financial system from spreading throughout our economy. Read more