Current Article

5….Biggest Post Election Slump in History!!

By Larry Doyle on November 6, 2008 at 7:00 AM in Current Affairs, Economy

Today’s 5-6% market selloff is the biggest post-election slump in history. If you think the markets aren’t nervous enoguh already, the prospects of a Democratic Congress and White House added fuel to the fire.

I fully appreciate that the campaign and election captivated our hearts and minds and souls over the last days, weeks, and months. To that end I refrained recently from regular economic/market posts so as not to distract from the main focus. Against that backdrop, though, we all have bills to pay so back to work we go.

Our economy remains mired in a slump that I expect to only get worse over the next few quarters.

–Jamie Dimon, the CEO of JP Morgan cautioned employees in Hong Kong that he does not foresee an economic recovery until 2010. JPM is currently the strongest banking institution in our country and has business in virtually every sector of commercial and investment banking. Dimon is sending a message to not only employees but even moreso to shareholders as to what he expects. We should all heed what he says.

–Dallas Fed governor said that he does not expect to see a positive GDP report until 2010.

Granted both of these individuals are simply sharing their opinions but I take these statements as an indication that we are headed not only into a recession but a deep one.

I could list an endless number of campanies who have given warnings about business prospects or have already announced layoffs but I do not have enough room or time. Let me share that I am still looking for the company that has a positive outlook.

One situation that I do have to highlight is the automotive industry. GM and Chrysler have little choice but to merge but would like government assistance in the process. The Bush administration has effectively said that they are not going to move on this request at this time and will allow the Obama administration to handle. I do not know if the markets or the cash needs at GM will allow that much time to pass. The UAW has already indicated that they do not support a merger given the expected loss of jobs. I may be wrong but either there will be a merger between these companies or a bankruptcy (GM…given cash constraints). I hope that I am wrong but I would expect that there will most likely be upwards of several hundred thousand (if not a million) jobs lost in this situation. The ripple effect with suppliers will add real insult to injury.

Credit has eased somewhat over the last few weeks with 3 month Libor now done in the vicinity of 2.50% from a high of 4.80%. That said, for lending to occur there needs to be real demand as well and right now neither consumers nor institutions are looking to borrow.

The yield curve (difference between short term rates and long term rates) is quite steep and IMO going to get steeper. This steepness portends a protracted slowing in the economy along with concern for longer term inflation. Not good on either front.

I do expect that we will continue to see consolidation in the banking industry, a likely lowering of rates by the Fed in December once again, and an unemployment rate headed to at least 8%-9% if not even higher.

I further expect the market to move between 7500-9500 and look for direction from the new administration. I am just going to go out on a limb and say that BO will initially look to pass a significant stimulus package while delaying an increase in tax rates. Read more on this front.

http://online.wsj.com/article/SB122591965987102467.html

All this said, all of the governmental supports already implemented and those that surely will be enacted are propping an economy that is in serious distress.

I do think that both equities and bonds are going to get cheaper from current levels and that short term CDs or short term high quality municipal bonds are a good place to park cash.

For a hint of what municipalities are facing, here is a piece on the trouble facing NYC. Mayor Bloomberg is talking about an increase in the income tax rate and significant cut in services.

http://online.wsj.com/article/SB122591965987102467.html

Your greatest investment is personal expense management and long term career growth. I hope that everybody reading this has an opportunity to work on both of those compenents to their portfolio.

To that end I share with you the following article in today’s WSJ:

http://blogs.wsj.com/deals/2008/11/05/mean-street-why-obama-doesnt-matter-and-you-do/

All the best.

Mark

We need the whitey tape now!
Geo

It is called the Obama Effect.
Geo

LA Times has a tape. I wonder why they are hiding it? They admit they are hiding it? They are running cover for Obama.
Tyrione

I give Obama 3 months after his inauguration before people start demanding answers.
Mandelay

Thank you again for the analysis and practical advice on how to deal with the impact of this crisis as it hits each of our homes. Much appreciated!
standard

The silver lining to all this is that he is considering Robert Kennedy Jr. to head EPA. And I am pleased with his other Clinton appointments.
If he is a Reagan but with a good, involved democratic staff, then I’ll be a happy camper.
http://www.TheOtherDemocrats.com Florida Ex-Dem

Exactly. He’s probably one of the most clueless individuals in a position of power we’ve seen – except for Bush. I’ve always said that an Obama presidency would be the equivalent of a third Bush term, with an arrogant idiot as the front man and a bunch of corrupt crooks behind him. Though I wish this country all the best, I don’t see that this will play out any differently.

Think his loyal following will riot if they don’t get immediate stimulus checks and if they don’t have their mortgages woes forgiven? ‘Cause that’s what they’re expecting from The One.
http://www.TheOtherDemocrats.com Florida Ex-Dem

Am I posting impaired? My posts seem to go ointo la-la land! Admin, can you advise?

Exactly. He’s probably one of the most clueless individuals in a position of power we’ve seen – except for Bush. I’ve always said that an Obama presidency would be the equivalent of a third Bush term, with an arrogant idiot as the front man and a bunch of corrupt crooks behind him. Though I wish this country all the best, I don’t see that this will play out any differently.

Think his loyal following will riot if they don’t get immediate stimulus checks and if they don’t have their mortgages woes forgiven? ‘Cause that’s what they’re expecting from The One.
tillthen

Good start, Barky, dontcha think?
tillthen

Standard, can you afford to pay 5 bucks-a-gallon for gas? Maybe so, but many hard-working Americans can’t, and that Kennedy Boy Scout will drive it to that level and beyond while making our enemies stronger. Still feel good?
http://edgeoforever.wordpress.com/ Not Your sweetie

The Christin right threw this election – we’ll pay for this
http://edgeoforever.wordpress.com/2008/11/06/who-stayed-home-election-day-what-was-the-price/
fiscalliberal

Interesting comment on the financial channel yesterdy. The $700 Billion will be spent before Obama is in office.

Treasury is starting to auction off the T Bills to pay for this. Initially the rate will be low because a lot of money has been with drawn from the market.

It will go up as the market picks up. One economist is predicting rampant inflation by second half of 09
Mickey

cool aid drinkers…

http://www.theonion.com/content/video/obama_win_causes_obsessive?utm_source=embedded_video
workingclass artist

If we go to Bread/Soup lines…Will we have enough Bread?
It seems to me that even in the best case scenario with Barky that positive returns on success of his infrastructure plans won’t be seen for at least 3 years and that was a big part of his ” I’ll save America ” promise. How many of these youthful slackers are going to be willing to do back breaking physical labor…You know the kind it takes to repair sewers, bridges,roads and construct housing that will remain empty…And if the banks after being given a lot of money won’t lend that money…I think Trump has sized it up pretty well.
It’s getting pretty clear to me Great Depression will be manufactured….And we all know how that turned out…
SJ

FOX says the tanking of the stock market after the election has nothing to do with the President elect choice, nah its just that the stock market is facing the reality that things are so bad.

Foreign media is calling this the worse drop in history after any US election, but here in the USA I guess we just love to live in denial and pretend that things are always great.

I just hope the media once again wakes up from this dream, they created this Obama vision, I only hope they are not going for the next 4 years keep pretending all is well because we are going to head over the cliff soon and there will be no way of pulling back up.
imustprotest

The LA Times is owned by The Chicago Tribune which is owned by Sam Zell, Chicago Real Estate Billionare.
SJ

All these Clinton appointments is change? and the main Clinton advocate Hillary he did not pick her as his running mate?

He made her look as if she was unsuitable for the post of President and will be more of the same, something he wanted to get away from, the old Washington way of doing stuff or so he said.

If that seems like honest campaigning from a man who was being truthful to the electorate and not just saying anything to win ok then I guess I can see why you are really happy
basil

I woke up convinced the election was rigged.

1 – Bush’s remarks yesterday were so . . understated, low-key, almost sheepish, as if he KNEW BO hadn’t won fairly won.

2 – that there was NO reported wide-spread voting problems is too suspicious -

3 – that the pollsters weren’t THAT far off in their final predictions for the past week BO would win by 5 – 7 raises a red flag. It’s almost as if the gap was decided on in advance – not too much, not too little . . ..

4 – That the Chicago celebration was planned moths ago, just like the MLK day nomination acceptance speech, just like the presidential convention opening speech 4 years ago . . .

5 – BM CONTINUES trying to control voters reactions practically ORDERING us to celebrate this f***in’ anti-historic event, telling people to save their daily newspapers and wrap them in plastic for posterity . . .

6 – JM was CONVNCED he had a great shot at PA and Ohio, Florida and Va. – I don’t believe his internals were that far off

7 – Another stolen election. Why bother having them anymore?
hadenough

obama answers: You fucked up, you trusted me
hadenough

Your greatest investment is personal expense management and long term career growth.

Shorter: Pay off your damn credit cards and take some classes
basil

For an explanation of the Federal Reserve, the PLANNED institution of the Great Depression and for a peek at what could happen under a BO administration, WATCH THIS!!!!!!

Part 1 (of 5) of the Federal Reserve. MUST-SEE!!!!!

http://www.youtube.com/watch?v=_dmPchuXIXQ&feature=related
stodghie

hey mark, get off your arse the free bus back to obama land is pulling out. the natives don’t care for your spitting on the sidewalk.
stodghie

fiscal, i read stagflation. economists? there are a few i like to read but i have to tell you when i see them on tv they are just as bad as many of the pundits sorry to say.
Uppity Woman

I don’t understand why the market slumped. Generally the market responds well to a Democratic President. They tax and spend as opposted to Republicans who borrow and spend.

But then, the market never had to respond to a Socialist president.

All those wall street workers who supported him can rest easy knowning they will get a welfare check from him after they are layed off. lol.

Of curse, when all of middle America loses its investments, they will all receive, each “according to their need” from the Government.
stodghie

robert kennedy jr will be put in the same vice that obama is in. he may do some good but major change? ain’t gonna happen!
stodghie

well there is food for thought there. sure some of the response was due to obama’s election. the doofus ran off his mouth about coal, etc right before the vote.

however some of it is simply due to economics.
bert

Ramdom thoughts on your excellent analysis LD:

Today’s 5-6% market selloff is the biggest post-election slump in history.

I thought this would occur if O was elected.

Our economy remains mired in a slump that I expect to only get worse over the next few quarters.

The economy which helped O get elected will probably be his undoing as well. Karma is a bitch.

Dallas Fed governor said that he does not expect to see a positive GDP report until 2010.

Just in time for the mid-term elections and for Republicans to take control of the country again.

BO will initially look to pass a significant stimulus package while delaying an increase in tax rates.

Delaying that increase will be the tax cut O promised us all.
LD

Basil…Your clip paints the fed and the bankers as co-conspirators in a scheme to gain power and control. Somehow or other our economy and country have made significant strides and progress over time.

Markets that misprice risk ultimately get punished and that is what is occurring right now.
stodghie

there won’t be a tax cut anytime soon.
Witzend

Apparently, BO isn’t the “change we can believe in” on Wall Street or abroad. Dow’s already down 115 this morning.
bemused

I enjoy these insights, LD. I watch the metal sales daily and try to visualize the forces behind them. Usually if the stock market is down, gold is up. This year rhodium took a huge drop, steadied recently, and is down today. Rhodium is used in jewelry and catalytic converters, mostly for European and Asian vehicles, so this suggests to me that those automakers are cutting back in investment and production. Platinum is the American equivalent. Copper prices have an effect on industry and housing, and vice-versa. When housebuilding was hot, copper was shooting up. Now housing is down, copper fell too.

Could you do an article sometime that’s a little more rational about these relations? I see the metals as a little more “real-world” than the stocks.
texdem

yes, nate silver whose 538 prediction site was touted by obamabots was xactly right on pop vote!?

I too felt the lack of vote fraud complaints, how quickly McCain conceded, how quick networks called close states.. all seemed like an orchestration.
LD

Bemused…

In regard to price action in commodities I think there are two real factors at work.

1. Indication of global economic activity. Obviously this activity is slowing precipitously and is reflected in the prices of these precious metals.

2. The price action is being exacerbated on the downside much as it was on the upside by the amount of leverage utilized by hedge funds that got long commodities and short financials throughout 2007 and for the first two quarters of 2008. We should not forget that even in the face of a “slowing” domestic economy earlier this year that oil, gold, and other metals were rallying.

The price action that we are seeing currently is the unwind of that leverage along with the slowing in demand.

My instincts tell me that “hard assets”, including precious metals, will actually outperform as we move throughout 2009 due primarily to currency devaluations (inflation) and as the economy bottoms.

That is not to say that prices for metals can’t get cheaper from here but that the selling pressure will likely abate as the economy worsens further from current levels.

Hope this helps.
bemused

Thank you. I think what I was trying to say is, who are the hidden players? For instance, the hedge fund owners. I don’t think hedge funds are well understood and would be a good Economics 101 topic for you as a different, educational post.
I hope metals perform well, as my family is indirectly in recycling them. But on the ground, as it were, metals are not doing so well. Breakage (misc. metal scrap, including hardware, broken household electronics, anything with recoverable metal) is very low. Our main buyer is Mexican and ships his breakage mostly to China, as do others. But China is not taking it, even turning back shipments en route. This is very worrisome, as processing breakage is labor intensive, not to mention polluting. If the US has to absorb all its garbage, it will be the dark side of industrialization that has been largely ignored.
Likewise, whenever gold makes a jump up or down, there are low-level rumors of “the Chinese” or sometimes “the Russians” influencing the cost by holding or dumping gold (meaning real gold, not futures or such) on the market. The Thai are the major jewelry producers, to the extent that they could also exert an influence, I would think.
Your writing is excellent and geared to a knowledgeable audience. Please consider how your points could be used to educate those who know less. Thanks again.
bemused

Oh, and in regard to PMs rallying–that’s the understatement of the year. We were amazed and delighted and very very lucky to get a gold price based on the highest month’s prices. Again, on a low-level, there are many like us at the mercy of commodity traders.
fif

Did anyone see Joe Scarborough on FOX this a.m.? Apparently Chris Matthews was on (with Andrea Mitchell), and Matthews actually made this statement:

“My job is to make this Obama administration a success. It should be the job of all journalists to make this administration look good because we are due for a successful Presidency.”

This needs to go viral. Joe really gave it to him, but Matthews is too stupid to know what a journalists’ job even is–to investigate the truth and report it factually to the American public, keeping public officials accountable to the people. His job is to “make Obama look good.” Please pass this on!
http://home.comcast.net/~vincep312 VinceP1974

If you guys want to see the Financial Disaster that is about to come, look at this graph that uses the STL Federal Reserve bank stats:

Link to Chart Graph

I plotted 3 series on this graph

Green Line: Total Federal Expedenures
Red Line: Total Govt Receipts (Taxes)
Blue Line: The amount of money in the “system”

Look at that blue line.. it’s like a wall , not a slope.

That means that we’re going to have an unstoppable inflation next year of serious magnitude.

And look at the growing gulf between the red and green lines…

Say goodbye to the Dollar. Say goodbye to Prosperity

Remember this when Rangal and Frank and Pelosi say that Deficit spending is something they’re going to do and no one can stop them.
jbjd

‘The Donald’ was on Greta’s site. According to him, despite the $700 billion bailout to the banks, the banks have failed to make this money liquid. In other words, they used that money for things other than lending out money for home mortgages or business expansion. This means, Congress gave out that money to free up capital without any guarantees from the lending institutions it would be used to lend money. (I would complain to my U.S. Representative, Barney Frank,* but he is not only the Chair of the House Banking Committee, he actually ran a commercial for the general election claiming the Republicans blocked Democratic efforts to reign in Fannie Mae and Freddie Mac, arguing, therefore, he needed to be re-elected so that he could spearhead the legislation necessary to fix this mess! And, evidently, people in my liberal bastion of MA believed him!

*Remember, Mr. Frank’s former boyfriend of several years, whom introduced as his spouse, was an officer with Fannie Mae, before Frank became the Chair of the Committee.
http://AmericasFavoriteTerrorist.com Gerard McNedich

Obama campaign workers angry because they haven’t been paid:

http://www.breitbart.tv/?p=214573

they sound angry…

a. hillary
b. mccain

america first
Bridgette

It’s a little late, we’re stuck with him. As I have told my friends…me and Rev. Wright can not agree on something. “God Damn America!” Lmao.
waldenpond

I am not understanding why the far right would complain about instituting their anti-choice or anti-gay platform. Obama supports the far right on these. Obama supporters are the ones that got Prop 8 passed. The far right was going to get support for oppressive policies no matter who won the GE. I would have thought they would have gone with Repubs for fiscal conservatism in a financial crisis. Go figure.
basil

Sorry LD, I’m a bit naive in financial matters, but WHO is going to be punished if not US tax-payers?

How do we know BO isn’t/wasn’t associated with the Fed and the banks?

We don’t know anything about him except that he’s a liar and a fraud.

WHY did the markets misprice risk and WHO is the ultimate beneficiary of this? I simply don’t believe the market meltdown is coincidental but I would truly appreciate your take as financial matters are not my forte.
/www.youtube.com/watch?v=ibsP6XN2dIo&eurl trixta

If it turns out that he is not a US citizen, it will NOT be too late. Biden will be our next president and HRC could be our next VP. (Okay, that’s a bit pie in the skyish….)

I still believe our duty as PUMAs is to reveal this fascist fraud and confidence man for what he is. Party Unity MY Ass!

In any case, those who are still planning to leave the Party officially should do so now to make a statement that the DNC will understand.
xmrk

good points.
Jim S

No sense in waiting 3 months, how about today?

http://www.wthr.com/global/story.asp?s=9299280
Bridgette

Oops…I meant “now” not “not”. Me and Wright can NOW agree on something…”God Damn America!” lol
workingclass artist

Seems to me this could reaction to perceived protectionist trend?
Of course I’m just an observer…
http://elect2009.wordpress.com OMGIAMGOINGNUTS – Cindie

DAMNIT! everything seemed to have been leveling off. NOW WHAT? grrrrr…not a good day here.
workingclass artist

Saw that Gerard…Poetic justice?…chuckle…
LD

This meltdown was years in the making. Rather than my trying to recapture all of it in brief right here, are you able to access my posts over the course of the last month? If so, I think I have tried to be fairly comprehensive as to what is going on in the economy and the markets.

I hope that you can access them. The posts go into housing, leverage, hedge funds, the rescue package….and in a word it all boils down to excessive greed on all of the contributing parties, including the banks.

As individuals and institutions in totality we were living beyond our means funded by excessive debt. This situation was also global in nature.

Again, for your own benefit please try to access my pieces.

All the best.

LD
Mr.Murder

The Bush economy hath wrought this, the billionaire bailout gang is cashing in their checks before they have to face a real version of the DoJ and SEC.
hootnannie

I heard today that there’s a run on assault rifles because of the fear that Bobo will initiate a ban on them. Dear God, it wouldn’t surprise me if there’s a run on the grocery stores too right before he takes office! I would bet that far-right fringe groups are busy processing new members (and maybe the Panthers too!) And when the O-bots don’t get what they were promised, will they storm the White House? I have my 401K in treasury bills, so unless Bobo manages to bring this emerging banana republic down around our ears, I guess my savings is safe (?)
hootnannie

I guess my savings ARE safe! (Or am I a pod person?)
http://home.comcast.net/~vincep312 VinceP1974

RFK Jr to head the EPA?

We’ll be sent to the fucking stone age

Holy shit

Ugh.. i’m going to have ulcers
getfitnow

Thanks, Larry for the articles. Very informative and have helped me decide what to do.
LD

my pleasure….happy to help….i won’t always be right but I will have an opinion…
anon

The root of the problem is simple: You can’t keep a household, a business, a city, a county, a state, or a nation running indefinitely when an ever-increasing level of debt is part of the equation. Either we’re going to deal with that reality, or that reality is going to deal with us.
LD

anon….you are correct, and that is why this situation is getting worse before it gets better…well put…
Andy

LD:

Thank you so much for you great posts: they are informative, thorough and easy to understand for someone like me. I look forward to you posts during these tough times.

Thanks again !!