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Wednesday, 8 October 2008
Wall Street Decline Makes Decade Worse Than ‘30s
Even the 1930s are looking better for stock investors in the United States after the credit crisis wiped out more than US$6 trillion from equities over the past year.
Even the 1930s are looking better for stock investors in the United States after the credit crisis wiped out more than US$6 trillion from equities over the past year.
The Standard & Poor’s 500 Index has lost 17 per cent since the start of 2000 after sinking almost 10 per cent this month. The decline would be the first for a decade in 70 years and exceeds the 8.9 per cent drop in the 1930s after the market crash of 1929.
“This is the worst financial experience in world history,” said Joseph Granville, a technical analyst and market newsletter publisher for 45 years. “We’re in October, and the market is crashing. What we’re seeing is complete demoralisation.”
The S&P 500 stood at a record 1,565.15 points a year ago, the peak of a five-year bull market.
Since then, the index has lost 31 per cent as the housing slump hit the economy, froze credit markets and saddled financial firms with almost US$600 billion in mortgage-related write-downs and credit losses.
The 12-month bear market pushed the S&P 500 to the lowest level since November 2003. While stocks lost money, 10-year treasury bonds returned 86 per cent this decade. The economic fallout from credit-market losses and bank failures has yet to approach the proportions of the Depression, when 7,000 banks failed, according to the Federal Reserve.
From 1929 to 1933, the economy shrank 46 per cent, while one in four Americans were jobless. Economists forecast growth of 1.5 per cent next year, up from 1.7 per cent.
That makes Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners in New York, more sanguine that stocks may soon rebound.
“You’ve got to make a bet on whether the financial system and the market system as we have known it since the end of the second world war is going to survive,” Mr Biggs said on television. “You certainly don’t sell on panic here. You buy.”
Any rally may depend on efforts to unfreeze credit markets, where borrowing costs have ballooned because of banks’ reluctance to lend.
The increase in borrowing costs may cause the government’s US$700 billion bailout package to fail, said Robert Stovall, a global strategist at Wood Asset Management.
The S&P 500 fell in the first three years of this decade, its longest streak of annual declines since 1939 to 1941.
Arthur Cashin, a New York Stock Exchange member for 44 years, says the speed and scope of the latest global sell-off makes the meltdown riskier and harder to contain than any past crisis after US$25 trillion of market value was wiped out worldwide.
“[It] has become a financial forest fire. I have never seen it happening contemporaneously around the globe where everyone is impacted.”
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Wall Street Decline Makes Decade Worse Than ‘30s
Bloomberg
8 October 2008
Even the 1930s are looking better for stock investors in the United States after the credit crisis wiped out more than US$6 trillion from equities over the past year.
The Standard & Poor’s 500 Index has lost 17 per cent since the start of 2000 after sinking almost 10 per cent this month. The decline would be the first for a decade in 70 years and exceeds the 8.9 per cent drop in the 1930s after the market crash of 1929.
“This is the worst financial experience in world history,” said Joseph Granville, a technical analyst and market newsletter publisher for 45 years. “We’re in October, and the market is crashing. What we’re seeing is complete demoralisation.”
The S&P 500 stood at a record 1,565.15 points a year ago, the peak of a five-year bull market.
Since then, the index has lost 31 per cent as the housing slump hit the economy, froze credit markets and saddled financial firms with almost US$600 billion in mortgage-related write-downs and credit losses.
The 12-month bear market pushed the S&P 500 to the lowest level since November 2003. While stocks lost money, 10-year treasury bonds returned 86 per cent this decade. The economic fallout from credit-market losses and bank failures has yet to approach the proportions of the Depression, when 7,000 banks failed, according to the Federal Reserve.
From 1929 to 1933, the economy shrank 46 per cent, while one in four Americans were jobless. Economists forecast growth of 1.5 per cent next year, up from 1.7 per cent.
That makes Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners in New York, more sanguine that stocks may soon rebound.
“You’ve got to make a bet on whether the financial system and the market system as we have known it since the end of the second world war is going to survive,” Mr Biggs said on television. “You certainly don’t sell on panic here. You buy.”
Any rally may depend on efforts to unfreeze credit markets, where borrowing costs have ballooned because of banks’ reluctance to lend.
The increase in borrowing costs may cause the government’s US$700 billion bailout package to fail, said Robert Stovall, a global strategist at Wood Asset Management.
The S&P 500 fell in the first three years of this decade, its longest streak of annual declines since 1939 to 1941.
Arthur Cashin, a New York Stock Exchange member for 44 years, says the speed and scope of the latest global sell-off makes the meltdown riskier and harder to contain than any past crisis after US$25 trillion of market value was wiped out worldwide.
“[It] has become a financial forest fire. I have never seen it happening contemporaneously around the globe where everyone is impacted.”
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