How Now, Dow Jones?


As USA Today notes, most of last week's big tumble on the Dow Jones was gained back by Friday: 

The Dow Jones industrials' 800-point rally Thursday and Friday was its biggest two-day gain in almost nine years, after tumbling nearly 1,000 points the prior three sessions amid fears of a financial meltdown.

The gains came for a variety of reasons (including the inevitable government bailout, whatever its specifics, the ban on short selling, and more). Not surprisingly, USAT had no trouble finding analysts saying we'd reached the bottom of the sea of red ink. What stock picker isn't constantly saying, "Buy"?

Interesting fact: According to Standard & Poor's, since 1937, the average bear market has lasted 11 months and included declines in the S&P 500 of 34 percent of value. We're in month 11 of the current bear, which has nicked the stock market for 26 percent. Of course, past losses are no indication of future gains, as much as we'd like to believe otherwise!

This much seems certain: This sort of market volatility couldn't come at a worse time if you want the government to stay out of markets (and the reason you want the government to stay out is precisely because it also introduces more distortion and volatility in the long run). George W. Bush has been a terrible free-market president, busting the budget and blowing the doors off when it comes to regulation. And now we've got Dems and Reps already in Congress, who want to be in Congress, or the White House, champing at the bit to come to the rescue of us all.

The DJIA is down about 14 percent so far this year. How does that stack up to past declines?

On September 15, the DJIA fell 4.4 percent, the single-worst percentage decline since the 9/11 attacks. But how does it stack up to previous one-day bummers?

Of course, the stock market, much less the subset of same that is the Dow Jones, doesn't tell the whole story about the economy. But perspective is one of those weird things that always seems to vanish in the heat of a stock-market slump, only to return when everyone is relatively fat and happy (and certain that stocks, or property, Beanie Babies, or something, will never lose value again).

NEXT: Choose Your Own Bailout

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  1. This sort of market volatility couldn’t come at a worse time if you want the government to stay out of markets

    On Bill Maher’s show this past Friday, Paul Krugman said ‘there are no atheists in foxholes, and no libertarians in economic crises.’


  2. The biggest difference with the last bear and this one is that so many more people are in the market now, so the panic factor gets cranked up a notch and the calls to “do something” are that much louder.

  3. Ahhhh yes, the great beanie baby failure of ’02

  4. How can you even watch Bill Maher? I can’t stand the people he has on.

    Andrew Sullivan and Naomi Klein, at the same table?

    I’d rather eat glass.

  5. We can still kill this turkey. However, just on constitutional grounds, the Dodd plan is better than the Paulson plan. I’ll grant you that both are hideously expensive.

  6. Soot me now! Shoot me now!

  7. Since this collapse is only tangentially related to stocks, as opposed ton 1929 or 2000, I’m not sure why the performance of the Dow is being used as a point of comparison.

    It’s like noting that someone who lost an arm in an accident only spiked a fever of 100 degrees, and comparing it to someone who died of a viral infection. See, now THAT GUY had a real fever!

  8. Well, the Dow is once again catering through the floor again today, so don’t count on it yet.

  9. What stock picker isn’t constantly saying, “Buy”?

    Er, mine? He’s been telling people to migrate into cash for the last year or so.

    He also says that, probably the best equities to own for the near to mid term are emerging markets.

    Did I mention that he is worth 9 figures?

  10. How many stocks are listed in the Dow? 30?

  11. Remove AIG, insert Kraft, and bingo, the DJIA looks successful again.

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