General Electric closed today (3/5/2009) at 6.66. An apocalyptic number? Odd, isn’t it. What is the market telling us?
I don’t think it is saying capitulation. The volume is not there. There is something different about this market. This is not a dramatic catharsis that like the proverbial phoenix gives rise to a beautiful new bird that flies again. This is the grind, the mashing of metal against metal that suggests something is seriously wrong with the machine.
Since Election Day the DJIA has dropped from 9,625 (11/4/2009) to 6,594 (3/5/2009), down 31%. This in a market that was already down 32% from an all time high of 14,093 in October 2007. Its not supposed to happen like this. And I don’t think the administration is listening. Or if they are, maybe they are hearing something different.
Federal Reserve Balance Sheet - Wall Street Journal
Between the 1929 and 1932, the DIJA fell nearly 90%; and by 1933 GDP had fallen by 45%. There were a lot of bad policy mistakes that were made during that time that contributed to the continued decline in economic activity. The current Federal Reserve appears willing to add trillion of dollars of debt on its balance sheets to avoid the monetary mistakes of the past. However, Congress and the White House seem to have taken a different message from the previous crash and the current one, and seem bent on trying to antagonize capital holders and businesses in ways that have not been seen since Roosevelt.
However, when you consider the market is down 51% from its high, half of which is during the time since a new administration was elected, it would appear that there is a new vote happening. This vote is in the markets and business investment and it is going in a direction that is opposite the one expected by our political leaders. Can they hear it?
