Contrarians Rejoice! S&P500’s Worst Year Ever
I guess there’s not a whole lot of Protection at work in the Plunge Protection Team!
“The worst annual decline in the Standard & Poor’s 500 Index since 1931 has dragged down every industry in the benchmark gauge and 96 percent of its stocks.
All 64 of the S&P 500’s so-called level-three categories, groups such as “distributors” and “leisure equipment” with as few as one company, dropped in 2008. Among 500 stocks, 483 slipped as the index fell 49 percent, poised for the biggest yearly retreat ever…
More stocks decreased in the current bear market than in the 49 percent rout after the technology bubble burst in 2000. The breadth of declines this year is leaving investors without defensive strategies to protect against losses that erased more than $8 trillion from U.S. equities in 2008.
During the S&P 500’s retreat between March 2000 and October 2002, nine industries climbed, including two — tobacco and health-care — that rose more than 80 percent. Since the S&P 500 peaked in October 2007, seven stocks in the index advanced, according to data compiled by Bloomberg. At least 10 times as many rose in the 2000-2002 sell-off.
Worst annual decline in eight decades? Geez, how incompetent must a secret, market-manipulating organization be before someone gets fired?
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Source:
S&P 500 Index Drop Leaves 64 Industries With Losses
Lynn Thomasson and Eric Martin
Bloomberg, Nov. 21 2008
http://www.bloomberg.com/apps/news?pid=20601213&sid=aL6HV7ahiGHM&
November 22nd, 2008 at 4:16 pm
Is this a veiled attempt at giving Steve Barry his due?
November 22nd, 2008 at 4:19 pm
Barry,
IMO there is a difference in this decline versus others we have had in the past. This one in particular has not responded very well to the traditional “Shock and Awe” that has turned investor sentiment in the past.
Also, the PPT, et. al. are totally overwhelmed by the sheer number of financial issues requiring immediate attention. It’s just too much to be handled effectively in the time-frame given. The tidal wave has been spotted on the horizon. At least that is the message I get from Hank’s sudden loss of confidence in his bail-out plan.
It brings to mind that famous passage from “Jaws”….We are going to need a bigger boat.
November 22nd, 2008 at 4:40 pm
This may not be a popular comment, nor do I really know how to say it - but here goes anyway;
Though the S&P (and the other indices) are way down, they are ’still’ not where they where in the early 1990’s. Granted, the percentage drops are enormous, but the increases over the last 10 - 15 years have been as well. A quick look at a simple graph will easily show that there was a huge run-up of the S&P (and the Dow) in the mid to late 90’s. The graphs prior to that time show gradual but upward trends since the 1940’s. These (spiking/bubble) graphs look very similar to those of housing prices - just spread out over a longer period of time.
So perhaps, just perhaps, equities (like home prices) have been over valued relative to historical trends - and they are just now coming back down to long-term historical prices and trends.
November 22nd, 2008 at 4:48 pm
It’d be at least 3.5% lower (or higher!) without the PPT.
To say that *because the mkt tanked…ergo, there is no PPT*, well, that would be like saying because *CaptiousNut went to government schools….they must be doing a great job.*.
November 22nd, 2008 at 4:50 pm
DL,
Since the cat is out of the bag, I’d like to thank you and several other commenters who have acknowledged my calls. The most outrageous and out on a limb one being what Barry is talking about:
The 10 day put call is around .95…long way to go to 1.3 which is a clear buy signal. For 6 months now, anytime QQQQ daily volume rises, the index drops like a rock. The market is rotten to the core. Short interest for the big QQQQ names is nonexistent. From Hussman’s site, S&P revenue was 940 per share last year…that is going to drop this year, conservatively to 900. Apply a historically high P/S of 1 to that and the S&P trades at 900. I see 2008 as potentially the worst year in S&P history, which is down over 43% (1931).
Posted by: Steve Barry | Jan 2, 2008 3:41:05 PM
Hey Papa Bear Kudlow…I am on record on this board saying that 2008 will likely be the worst year in S&P history, beating the -43% in 1931. If I’m right, I want to be a guest on your show for the best call ever. All I need is for the S&P to have a historically high P/S of 1 on 900/share in revenue. Seems like a piece of cake.
Posted by: Steve Barry | Jan 4, 2008 9:44:49 AM
“This universe was populated with pollyannas, perma-bulls, overtly political economists, and Wall Street cheerleaders.”
They all bow to their leader…Larry Kudlow.
My prediction the other day that this will be the worst year in S&P history (-43% in 1931) is off to a good start. QID up 12% YTD. Understatment of the year by Dylan Ratigan…”sub-prime may be starting to affect tech stocks”…starting? QQQQ way underperformed every index today. Many top QQQQ stocks have short ratios of about 1/2!!!! Short of a lifetime.
Posted by: Steve Barry | Jan 4, 2008 4:12:34 PM
November 22nd, 2008 at 5:18 pm
SB,
that’s what’s up, Dude~ Nothing better than signing your own Name to the Timestamp!
If the ‘Cained Peep ever wake-up to how this setup was set up for the Takedown, we, might, finally, get some “”Change”, we can believe in.”
BR, kudos to you, too, for keeping your archive intact.
November 22nd, 2008 at 5:21 pm
Tho, BR, to this: “Worst annual decline in eight decades? Geez, how incompetent must a secret, market-manipulating organization be before someone gets fired?”
I’ll ask: “When was the last FedRes Chair, and its Board, Fired ?”
November 22nd, 2008 at 5:22 pm
This year should put to rest any belief in the invisible hand of a PPT. The Feds ARE active in commodity, gold, and treasury markets, mostly because they are of a size or nature that our government can actually make a difference. With the US stock market, unless they plan to speculate with size in the market (which would usually force big losses), any plunge protection they could offer would be very brief. Case closed.
November 22nd, 2008 at 5:32 pm
Barry,
Now who has the difficulty with corroboration and causation?
You can’t seriously believe that with all the money at stake, the PPT would NOT try to manipulate the market. That wouldn’t just be naive, it would be politically ignorant. The Reptilians lost! What happened after November 4? Do the markets seem more sane? Is this corroboration or causation? Is it spite or revenge? OH, they don’t do that in finance? Give me a break! There is a LOT OF MONEY involved here! It’s a death struggle for maney rich tycoons. They are fighting with everything they’ve got! Enjoy the show; it runs for another year ot so.
Here’s how economist Henry C. K. Liu sums it up in his “Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy”:
“Neoliberal economists in the last three decades have denied the possibility of a replay of the worldwide destructiveness of the Great Depression that followed the collapse of the speculative bubble created by unfettered US financial markets of the ‘Roaring Twenties’. They fooled themselves into thinking that false prosperity built on debt could be sustainable with monetary indulgence. Now history is repeating itself, this time with a new, more lethal virus that has infested deregulated global financial markets with ‘innovative’ debt securitization, structured finance and maverick banking operations flooded with excess liquidity released by accommodative central banks. A massive structure of phantom wealth was built on the quicksand of debt manipulation. This debt bubble finally imploded in July 2007 and is now threatening to bring down the entire global financial system to cause an economic meltdown unless enlightened political leadership adopts coordinated corrective measures on a global scale.”
For those who just can’t get a handle on the big picture, try this thought experiment:
NOBODY but finacial institutions can leverage 30 to 1 (Fan and Fred gotup to 100 to 1). Now, figure that the real economy (actual non-paper assets) represents one twentieth (to be conservative) of the paer assets (leveraged fiat currencies and other credit multipliers).
Here’s the punch line:
When we have a global margin call like we are now having, no one wants to see your monet; they want to see the collateral (a real asset). So-o-o-o the tidal wave of liquidity converts into the reverse torrent of stagnation which then turns into a nuclear winter. In other words, for a few years, fractional reserve banking is dead. NOW YOU HAVE ONE TWENTIETH OF WHAT YOU THOUGHT YOU HAD!
Some math exercises:
40 billion divided by 20 = 2 billion (Buffett’s future worth)
$450,000 divided bu 20 = $22,500 (the “value” of your house)
Ridiculous? Do your thing, pal. People like me have been screamung about this crap for years (since 2002) and the greed pumpers, stock jocks and house flippers were too busy playing who wants to be a millionaire. Keep believing if you want. You’ll come around eventually.
November 22nd, 2008 at 6:14 pm
The PPT knows that it can’t fight the LT downtrend which is driven by the de-leverage loop. The PPT knows it isn’t bigger than the Market. But the PPT does what it can to make sure the market decline is “orderly” and giving the good ole boys (such as GS and JPM) time to unwind their positions and minimize losses.
The thing that jumps out at me is how orderly the decline is, especially from May to July. Beginning in Sep, it appears that the PPT’s weapons were insufficient to stem the tide.
November 22nd, 2008 at 6:23 pm
Any coincidence the PPT banned the uptick rule right at the top, when anyone with a functioning brain cell knew Structured Finance was about to have a major seizure and Wall Street soon would be developing a Somalia-sized starvation for capital? I think not.
So, any firing would be in keeping with every other response to the crisis being floated in the mainstream, in that it would be coming long after the horse has been let out of the barn…
November 22nd, 2008 at 6:44 pm
And about the PPT…my other call, made in June, was that they would let the market tank just a wee bit after Obama got elected…nailed that one too, but it is even worse than I thought and only Jerry Bowyer seriously blames Obama. Part of PPT type activity is also the relentless positive spinning of data, (eg. NFP, CPI, housing) that BR always talks about.
Just had a weird premonition…it’s November…Obama just wins the presidency…the current administration immediately turns off all spin machines and behind the scenes machinations on the economy…Market crashes and common perception blames it on Obama getting elected and Wall Street being unhappy.
Posted by: Steve Barry | Jun 5, 2008 11:14:26 PM
I agree with Kudlow that if Obama gets elected, the market tanks, but for a different reason. Not because the market dislikes Obama, but because Team Bush will pull the plug on market life supports and PPT to make Obama look bad.
Posted by: Steve Barry | Oct 9, 2008 8:13:29 AM
November 22nd, 2008 at 6:49 pm
@ Mark E Hoffer I’ll ask: “When was the last FedRes Chair, and its Board, Fired ?”
Awesome line…that’s a keeper.
Reminds me of the time a few years ago when I told the Chief Economist at one of those recently taken over WS firms that the Fed should be abolished…he looked at me like I had eight heads and stormed away.
November 22nd, 2008 at 7:16 pm
These drops and technicals show that this bear market will last 13-15 years.
November 22nd, 2008 at 7:35 pm
@BR — “how incompetent must a secret, market-manipulating organization be before someone gets fired?”
This is still the George W Bush traveling circus, at least until inauguration day.
Doubtless the PPT is doing a “heckuva” job.
November 22nd, 2008 at 8:00 pm
The year is not over.
November 22nd, 2008 at 8:23 pm
Since the PPT is secret, how do we know that no one has been fired?
November 22nd, 2008 at 8:42 pm
Giving it some more thought, the fact that the market is tanking so hard for so long almost affirms that the PPT DOES exist, not the other way around. Imagine a group that intervenes in the market when it needs a boost…this goes on for years…any true believer in the power of free markets (not Larry K) realizes this is foolhardy and will lead to moral hazard. The market is not being allowed to clear at its natural price. It can only end in disaster…otherwise, we would have had Dow 36,000 by now.
November 22nd, 2008 at 9:28 pm
Anyone see the Obama plan to create a plan to create 2.5M jobs? Pithy.
November 22nd, 2008 at 11:28 pm
I did see the Obama plan but i can’t post for fear that SB’s big swinging d*** will knock me out.
November 23rd, 2008 at 12:04 am
If there is a PPT, I think that it would be meant to work only sporadically and when absolutely necessary. And it would be driven through the [used to be] big Wall Street firms Goldman, Morgan Stanley or the now defunct Lehman, BS, etc. Maybe with the decimation of the financials, whomever might be behind this PPT doesn’t have many firms capable of pumping the market any longer so can’t control the sell-off’s the way they used to? All they got left now is CNBC [lol].
November 23rd, 2008 at 12:22 am
If Obama wants to create 2.5 million jobs easily he should bring the soldiers back to America and get them guarding the US-Mexican border. Then all those US businesses will have to hire Americans to do the work. They may have to pay a little more though
November 23rd, 2008 at 12:25 am
Barry, when this year is finally out, I do recommend a thread called “Reader of the Year: Steve Barry Edition”. Maybe Steve could contribute to the main post, including his photo and some of the data points that led him to be so strong in his conviction.
November 23rd, 2008 at 12:31 am
How the PPT has ’saved’ the market this year is exactly why so many people argue against pointless government intervention. It is like throwing a glass of taxpayer water at a fire. It doesn’t do much for the fire and if the thirsty guy finds out you stole his water in order to ’save’ your house he won’t be too happy. If he also finds out you were the one who torched it in the first place and that you probably have fire insurance anyway, then your house will not be the only thing burning. Especially if the only reason you torched your own was to catch his house ablaze knowing he doesn’t have fire insurance and represents a ‘competitive’ threat to your being able to sell your house…..even though you have fifteen other houses.
November 23rd, 2008 at 12:51 am
yikes! davidb, i think i actually understood what your point was…
November 23rd, 2008 at 1:27 am
“Geez, how incompetent must a secret, market-manipulating organization be before someone gets fired?”
It is kind of like trying to fight global warming with air conditioning (seems like it would work).
Sometimes, I like to imagine that they’ve been playing the short side to pay down the national debt (because we’d never agree to tax increases to do that). But, they’re probably just pin boys for short-sellers. They’ll set ‘em up, you knock ‘em down.
So, I gotta know, did anyone here say at 3:00 pm yesterday “TIM GEITHNER!! For real? C’mon let’s go buy everything!” ??? I’m told to believe that his appointment to Treasurer was worth 500 points on the Dow (in one hour) 2 months before he take office. This tin-foil hatter played that rally, without knowing who Tim was (I just look for Charlie G around options expiration).
And hey, a few more sprinkles of sunshine next week, strategically spaced, and the chatter around the Thanksgiving table will be a whole lot more optimistic. Maybe I’ll even get up at 5 am for the Kmart doorbuster special on Black Friday (cause everything’s gonna be OK). No need to gather up the pitchforks, torches and wood-chippers (BR).
You can’t put a price on warm, fuzzy, moments like that, can you?
November 23rd, 2008 at 1:39 am
you see, karen, I told you, you needn’t worry..
~~
SB,
with this: “Reminds me of the time a few years ago when I told the Chief Economist at one of those recently taken over WS firms that the Fed should be abolished…he looked at me like I had eight heads and stormed away.”, I hear ya. It’s amazing that those, that pretend to be ‘Economists’, can get away with ignoring/not mentioning the Greatest perturbing Force known in the Marketplace.
Though, to others, who may be afraid/not sleeping, this is no time to Freeze/Pull into one’s Shell.
What we’ve seen, come to fruition, to date, bad as it may have been, is, still, mostly Financial in nature.
There’s whole set of Economic values fixin’ to come under attack, out in the open. The groundwork, the dimunition of our National Sovereignty and the stripping of our personal Rights, are, but, two teeth in a set of Jaws waiting to close on our unsuspecting selves.
As I’ve spoken to before, we can, either, awaken to what’s Up about what’s going Down, or we shall find ourselves swirling in a vortex of a Poli-Sci-Fi Nightmare that Hollywood has only shown us glimpses of.
Crichton, a Genius, in any account, hardly alone, told us aptly: It is a “State of Fear” that we’re existing with. http://www.amazon.com/State-Fear-Michael-Crichton/dp/0066214130
That one Book, hardly alone among his, many, Signal calls, from a single, of a vast array, Author, should be enough to kick-start one’s understanding that there’s a different Game afoot, than the one, allegedly, at hand.
Past that, take a piece of advice from a Real Economist: “Do not give in to Evil. Proceed, ever more boldly, against it.” IOW: Tu ne cede malis sed contra audentior ito– von Mises
http://www.mises.org
November 23rd, 2008 at 1:44 am
Mark! you are teasing me with all those commas… i got dizzy, sick actually.
November 23rd, 2008 at 1:57 am
karen,
past that, just remember, Speed Kills–and that has nothing to with Velocity..
http://www.thefreedictionary.com/speed
November 23rd, 2008 at 10:08 am
Steve Barry - you realize how horrible idea it would be for the Republicans to let the market tank NOW right? the problem is that Obama will take office in January, and be benchmarked FROM THERE! he’s not benchmarked from election day…
so when the SPX is at 600 on Jan 20,2009, Obama will have the easiest comp numbers in the history of the world… and come out smelling like a rose.
it wouldn’t matter anyway - everyone will just continue to blame TBA (The Bush Administration)…
November 23rd, 2008 at 11:00 am
how incompetent must a secret, market-manipulating organization be before someone gets fired?
Fired? Are you kidding? They’ve been promoted. You know that failure is not an issue for the aristocracy. Their Christmas bonuses are being handed out early — that’s why the market is falling!
(Disclaimer: I have neither knowledge or nor belief in any imputed PPT. I neither accept nor reject the existence of that which I have no actual data about)
November 23rd, 2008 at 12:33 pm
@karen Says:
November 23rd, 2008 at 12:51 am
yikes! davidb, i think i actually understood what your point was…
Well, that makes one of us Karen (;
November 23rd, 2008 at 5:40 pm
Those who believed in the PPT were not cynical enough to imagine the truth.
Which isn’t the worst thing.