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Monday Morning Market Musings 09/07/98
Beyond Reassurances
It was another wild week on The Street. Monday’s 512-point mini-crash in the DJIA was its second-worst point drop on record. (See Crash Update.) Tuesday’s 288-point rebound was strong but short-lived, with the index giving back 188 points of that gain the rest of the week. The 5.1% drop for the week was its worst since, well, the prior week’s 5.5% plunge. Let’s see, that makes 10+% in two week. August 1998 was the worst (point-size) month for the DJIA in history. Yet most money managers still characterize this as a "correction" in the bull market. Are they just stubborn, or worse?
There really wasn’t any new news to trigger Monday's mini-crash. As with other sell-offs since the July 20th peak, there really weren’t any signs of panic, capitulation, or submission. The markets just slipped, slided, and finally melted.
World "leaders" are worried. Really. They’re way beyond the obligatory Statements of Reassurance:
- Fed Head Alan Greenspan’s warnings of "irrational exuberance" last year are but a distant daydream. His concern now is the financial well-being of the entire US economy: "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress." Stress? STRESS!#&#?? The entire geo-political infrastructure is spiraling inward and imploding like never before, and he calls it "stress!"
- Greenspan did get it right with this observation: "...periods of euphoria or distress tend to feed on themselves." Indeed, that’s what happened over the long-term (on the upside) from August 1982 through July 1998. And that’s what happened over the short-term (to the downside) last Monday. And that’s what will happen again and again over the next several years as this Great Bear Market retraces most if not all of the Bull's advances.
- The most ludicrous of the week’s pronouncements was offered by IMF Poobah Michel Camdessus: "I’m certain that the recent decisions with respect to credit ratings of these countries will be promptly reversed," in reference to Moody’s recent negative actions towards Mexico, Brazil, Argentina, and Venezuela, the heart and sole of the Latin American economy.
- "We’ve entered a new stage of recognition that this truly is a global problem, and we’re not going to escape it." Charles Daliara, Institute of International Finance.
- US Treasury Secretary Robert Rubin really went out on a limb with this one: "There has been spillover from the turmoil elsewhere."
- Perhaps the most worrisome actions of the week were from two former Asian "tigers." Malaysia has virtually prohibited foreign exchange trading in its currency, the Ringgit. The Hong Kong government has been dabbling in market waters, gauging the strength of the undertow for potential future mischief. They’ve also taken steps to effectively prohibit short selling on key securities. This resurgence of interventionism can only serve to delay and then accelerate the inevitable destruction.
Followers of astro-advisors Arch Crawford, Steve Puetz, Chris Carolan, and others are keenly aware of the potential for an historic drop in the markets, perhaps this week. Combine their prognostications with several long-term cycles pointing down sharply into September and October, the historically worst performing two months of the year.
To sum it up, US stocks remain on FULL CRASH ALERT! There may be a few days of rally to relieve the short-term oversold technical condition of the market, but be ready for the trap door to spring open at any moment and take the DJIA down a thousand points in a day.
"Either lead, follow, or get out of the way!"
-- Lee Iacocca
Grizzly
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