Dow industrials plunge another 200 points
And it’s another great day on the stock markets! The Dow Jones continues its free fall:
The Dow Jones industrial average has fallen another 200 points today on new concerns about the stability of General Motors and the ongoing uncertainty about the financial system. In afternoon trading, the Dow is down 228.35, or 3.32 percent, to 6,647.49, a low not seen since April 1997.
The Standard & Poor’s 500 index dropped 25.61, or 3.59 percent, to 687.26. The S&P has not traded below this level since October 1996. The Nasdaq composite index fell 39.54, or 2.92 percent, to 1,314.20.
Investors are having another change of heart and are selling stocks again after a one-day burst of optimism.
I bet Obama, Pelosi and Reid – o, and the three Republican rebels – are darn proud of themselves. After all, the stock markets truly crashed after investors find out what these Democratic intellectuals planned on doing about the economic crisis, which isn’t much. Instead of stimulating the economy they simply decided to hamstring it and to make life impossible for investors and businesses. And then the stock markets crash. Who would’ve thought?
This website uses IntenseDebate comments, but they are not currently loaded because either your browser doesn't support JavaScript, or they didn't load fast enough.
Comments are closed.
PoliGazette Comments Policy
PoliGazette encourages comments from all viewpoints, especially those that disagree.
Comments submitted must, however, adhere to the following standards. Comments that violate
these standards may be edited or deleted without notice at the sole discretion of the editors.
Commenters who repeatedly or egregiously violate these standards or who attempt to argue
publicly with editors regarding the comments policy may be banned from commenting further.
(1) Comments should address the substantive content of the post. Comments that repeatedly
or blatantly misrepresent the content of the post or of others' comments are not welcome. Comments that
respond to something other than which the contributor or commenter may have said are irrelevant and should
not be posted.
(2) Comments should avoid vulgarity as well as racial, ethnic, religious, or sexual bigotry.
(3) Comments should not personally attack the character, personal integrity, or professional
reputation of any PoliGazette contributor or of other commenters.
(4) Comments should reflect the contributions of the commenters themselves and should not
include extensive cut-and-paste reproductions of others' words except insofar as necessary to supplement
the commenter's own arguments. Link spam, trackback spam, and propaganda spam will be instantly deleted.
(5) Public figures are considered open to all substantive criticism of their policies and statements.
Comments that present objectively false factual information about public figures (i.e. "Obama is a Muslim") or
that attack public figures by attacking their families are not welcome. Comments that merely repeat
slogans for or against a candidate without engaging in substantive comment are not welcome.
Questions or challenges to these policies or their application should be directed to the editors
by email only.
Gyrations!
The stock market crashed last year, and it’s been on a downward trend ever since. Did you honestly expect it to turn around in a month because of Obama?
High job loss reports and low earnings reports seem to be coming out every day. Plus there is even more troubling news overseas. Don’t these seem like more likely drivers of the stock market than vague budget and spending plans?
No, Chris, it is not. Stock traders are more likely to react to economic policy changes than they are to continuations of non-economic foreign policy trends.
If you had focused your argument on differentiating among the various possible dimensions of perceived economic problems (many conservatives have been far too sweeping in linking its criticisms to the stock market declines) instead of just trying your usual blanket partisan spinning, you would have been much more effective in your comment.
I would say that the problem is not the “vague plans”, but rather one that is all too specific — the Obama proposal to raise capital gains taxes by 2011. That limits the upside potential to a stock market recovery and encourages traders to sell now as a result and put their investments in less tax-vulnerable vehicles. Municipal bonds traders are having a field day reaping the flight from stocks that results from a supremely badly-timed tax-increase proposal.
I think the overall downturn in the stock market and the economy is not possible to blame on Obama. The newest parts (after Jan 20th) and especially those that coincided with specific policy announcements (like his tax increase plans) can be legitimately laid at his feet. It is, of course, an open question as to whether the stock market is the best measurement of policy quality, but of course that probably wasn’t in your pre-written talking points either and it would require original thinking for you to flesh out that argument. Perhaps you should give it a try….
I meant bad ECONOMIC NEWS from overseas.
Right. Because the most reasonable assumption is that US stock traders are ignoring all the domestic economic news and focusing exclusively on foreign economic news.
You appear unbelievably desperate in your continuing efforts to maintain a 100% pure-partisan-talking-point record.
“I would say that the problem is not the “vague plans”, but rather one that is all too specific — the Obama proposal to raise capital gains taxes by 2011.”
Jason, are you seriously arguing that the market is crashing today because of proposals that won’t take effect until 2011?
you don’t actually believe that news reports for future policies do not have immediate effects Polimom do you?
Jason and Chris, I think both of you would do well to stop arguing over which was the last tree to fall in the forest, and instead focus on the hurricane that continues to devastate almost every standing tree.
The continuing fall of the stock market collapse can be blamed far more on US governmental policies that have been or had been in place for years, such as the artificially low interest rates throughout most of the last decade, the official and grossly irresponsible (but I repeat myself) subsidization of home mortgages for the low-income and credit-unworthy, and the increasingly (and suicidal) debt-addiction of Americans on all levels —- among a host of other such policies.
The current financial and economic collapse is a cake that was baked over many years, and by many Washington and Wall Street cooks. Do not blame its bitter and unpalatable flavor primarily on the man who happens to be unlucky enough to find himself serving it to the American people, even though he shares the blame in forcing us to eat more of it than we otherwise might.
Polimom-I’m pretty sure that historically this has always happened when a capital gains hike is announced (I’d have to search around for the data but I have examined it in the past.) The reverse is also true- when capital gains taxes are lowered it leads to profit taking in the short run.
When you’re talking about increasing the yield by several percentage points, of course people are going to consider that in timing the sale of investments. A big part of motivation for investment at all (vs. savings) is to use current assets as a guard against inflation, and in order for that to make sense at all you have to consider the effects of inflation and taxes in eroding the growth of your invested asset.
What you may be overlooking here is the specific time period and expectations for the short term market performance. The point is that anyone who might be motivated to put money in the market now knows that it only makes sense to do so if the investment will perform well enough to cover the increased tax liability, and with the economy doing as poorly as it is that is anything but a sure bet. Under that scenario, investing in bonds makes a lot more sense, so money will be kept out of the stock market rather than encouraging investment that fuels economic growth of the private sector.
So, it’s not JUST the announcement of this tax hike that’s killing the stock market- but it’s like driving the nail into the coffin.
Yes. Investors react based on expectations about future returns on their money. Because the prospect of a capital gains tax increase undermines the potential of future returns on stock that is held instead of sold, such a proposal encourages selling NOW and the diversion of the proceeds into areas that are NOT being targeted for new taxes.
This is not a particularly controversial notion of how investors behave.
LOL Jason. That’s a wonderful closing sentence.
I agree with both of you, CStanley and Jason, that future returns drive the market. But when you’re talking about events 2 yrs down the road, in combination with the massive slides prior to the most recent, it doesn’t make a lot of sense to me. The DOW first dropped under 8000 in October, and went below 7500 in November. We’ve been moving this direction for months, and the acceleration seems more tied to the general bad news to me.
What I think we’re seeing in the market, to be honest, has more to do with the deepening recession (a la jobs reports, consumer confidence, etc), and people reacting in fear. We were going this direction, regardless.
Polimom- think in terms of a person who needs return on investment in the next couple of years. Would you even consider getting into the market or staying in under the condition that you’ll have to pay an additional level of tax when it comes time for you to need your money?
Or someone who is trying to decide whether or not to take the losses they’ve already suffered by cashing out now vs. later. With little hope of a quick recovery and the knowledge that cashing out after Jan ‘11 will incur additional costs, some will choose to take their lumps now.
I think there’s a combination of several policies (or nonpolicies) which are clearly leading to an accelerated downturn.
1. Indecisiveness on the bank/credit crisis.
2. Complete lack of action on addressing the regulatory failures which compounded the Wall Street/credit/housing crash. Why has Obama chosen to simply use populist rhetoric toward those rascally investment bankers and CEO’s instead of looking at the fingers that point back toward the government and showing decisive action to apply regulation where needed and address the failures of the GSE policy? Why would any ordinary citizen looking for a safe place to grow a retirement nest egg believe that the stock market is a good haven when the govt tinkering in the markets (allowing them to become ponzi schemes) is not going to be seriously addressed and corrected?
3.The tax policy which clearly is also populist in nature.
These are quite simply anti-growth policies.
C Stanley, I can’t speak for others, of course, but in the case of my own household (which I assume is pretty normal) — we’ve taken enormous losses already. Pulling out now would be akin to setting it all on fire. We’re seeing panic selling, I believe… nor do I think it’s done. Might even get worse before it gets better. Downturns are always scary, and this one is more-so than any I can remember — but when the companies in which people invest are posting enormous losses and laying people off, the cause / effect relationship looks pretty immediate to me.
Frankly, the populist rhetoric is driving me nuts, too. Makes my skin crawl (and has done for many months now). OTOH, I’m disgusted by the way our markets have been run, and the people who have run them.
I’m not sure, though, what to say to your #2. Obama’s been right out there since last fall (and right up through last week) with proposals for overhauling the regulations. His approach in that area, in fact, is what won the support (however tentative) of many people I know who are both fiscally conservative and heavily invested in the markets.
As far as the problem with taking losses now rather than trying to recover some of it, Polimom, it entirely depends on people’s age and needs. If you’re closer to retirement age than you and I are, then it’s a completely different situation because you can’t afford to wait out the market unless there’s reasonable hope of it rebounding pretty soon. And again, adding insult to injury is the fact that such people now know there will be a higher tax if they wait.
On your last paragraph- what regulations has Obama been promising to overhaul, and what signs are there that he’s serious about figuring out where we went wrong and making course corrections?