Since March-and in many stocks since November-focusing on the recessionary economy has been the crowded, wrong, money losing trade. There's no one alive who doesn't know the economy sucks relative to 2006. But OTOH the economy hasn't slowed anywhere near enough to justify 1998 prices. Wanna pick a year with bad news? How about 1968. A half million troops in Vietnam, the same President who won in a 1964 landslide was afraid to run in '68, the presumed Dem nominee assassinated, the most famous civil rights activist in American history assassinated and his death causing riots in dozens of cities, the Democrat convention turns into a free for all and in 1969... the Nifty Fifty popped the market back to the highs. Or how about 1974. A 50% plunge just like last year. A President resigning in shame. His unelected VP inspiring few. Whip Inflation Now buttons. NYC broke and creepy in a Warriors sort of way, and double digit unemployment. Bada bing right back to the highs. I was charting some index components tonight. A real bloodbath, eh? IBM, GS, GOOG, JPM, AMZN...cripes it's like looking at 1999 ramp city spikes. That being said I'm a nervous sudden short due to the short end of a 880-915 ratio call spread winding up itm. I'm not going to get silly pressing but I won't be shocked if we fail here, again. I also won't be shocked if we're at 1050 in several weeks.
This economy is far worse than any year you cited, in terms of job loss, wage deflation (in real terms), and an overall structural change that is more significant (and adverse) than anytime since the aftermath of WWII. We are bleeding jobs, consumption, and businesses at the most rapid clip since the 30s, and unlike those years of business cycle declines you highlighted, this downturn is not a cyclical, but a structural one. No one is coming back to bid pre-crash prices for homes, real estate or many of the other assets that have crashed hard, unlike in past crashed. In the downturn of 1979-1981, people who were 'laid off' with pink slips were rehired by the same companies they worked for when things turned back up, and these people started buying homes again at greater than pre-downturn prices, and at much higher mortgage rates, to boot (anywhere from 10% to 18%, in fact), because they had job security again, and because they were making more money. That's absolutely not the pattern this time; it's just the opposite.
ByLo, I enjoy your posts. Imo, what's the news? A buy or sell? How many stocks have sell ratings vs buy ratings? The "buy" news is suffering from confirmation bias. No one wants to deliver the "sell" message.
This typical bear market is so textbook. It's not like we're seeing things we have not seen in almost a century, and it's not as if we're seeing things no one would have predicted as near as just two years ago (Lehman, AIG, General Motors...I could go on ad infinitum, but why bother when you're the recipient?).
Thanks. It's exactly at times like this when the danger is the greatest. Pabst talked about how he wouldn't be surprised to see the market crash, or make an intermediate term high; how can rational investors make sensible and comfortable moves given such lack of clarity? This doesn't just apply to private enterprise, but government policy, also, as tax reform (higher), health care (big expense) and a slew of other once in long time, big ticket items are up in the air now. And then you have a smaller band of people working in the financial industry, striving to get the masses back into institutional investing, trying to get their revenue up, with the all important proof that the market has risen since the March lows, with a litany of buy ratings yet again.
As you and the world know-I'm open to the notion of a once every few centuries cataclysmic, global, government, social order holocaust. But it's not the percentage play. Unlike you, I've also been here before. No, this isn't as bad as the earlier years you cite. The American automobile industry didn't die this year-it died then. As did our steel industry. And domestic, manufactured stapes like appliances, shoes and apparel. As well as the family farm. Pittsburgh, Gary, Oakland, Buffalo, Cleveland, St. Louis, Birmingham and Detroit ceased being functional four decades ago. You live in America post Roe v Wade. You cannot witness the destruction of the white middle class because it already happened decades before you were born. Whites and "jobs" are long extinct. If you look at white only unemployment today vs. white only unemployment in the early 1980's, you'll see that this recession is hitting minorities far worse and that white workers have so far been pretty unscathed compared to past recessions. Just listen to Springsteen's earlier albums. His first was recorded in 1973. When's the last time folks were working in factories in Asbury Park? The white folks not on the edge are living far better than back then.