Just In Case You Thought This Is An Ordinary Bear. 
My favorite gloomy blog Calculated Risk features a chart (below) comparing the crashes of '74, '87, '01 and '08, and will soon post the '29 version. We are watching the same pain that provided Warren Buffet his start in the Richard Nixon bear of '74 and that gave the banks their game of dungeons and dragons with fantasy CDS after '01. The end of the selling does not mean that the markets start back up. We settle down to the long wait. In'29, that was through 1933, and then it started down again in '36 after FDR misread the scene and stopped hiring and spending with printed money. The semiotics show that Mr. Obama is reaching for his Abraham Lincoln hat to build a Cabinet and government, however the guidance from the tough guys on Wall Street is that he best put on the FDR hat and start spending like the WPA, CCC, TVA, and start regulating like the NRA. Both versions are cartoons, but useful for magazines. (Who buys magazines?) Reading my London Times 1933 has taught me that you don't know where the bottom is when you are in it, and you don't know what it feels like when
you are in it because denial is the way the body deal with fear. My Virginia culture watcher tells me that while the restaurants are full, the auto showrooms are empty (right, the grim reapers of the Big Three on Capitol Hill Tuesday Nov 18) and the job offers for young people are sparse and worse. MBA grads are abandoned. I watched the restaurant crowd in the hip Village last evening and saw much wining and celebrating; however, when I listened, the vivacious young people were speaking of cutbacks, layoffs, no buyers and a few about picking up business because they are local. Men are from Mars, women are from Venus, and this economy is from a crater on the moon. Turn out the lights, the ConEd bill isn't paid since summer, and we don't much own the house anyway, and who can fix a lamp now, let it be dark.
Update 1830 pm:
Now I hear from my trader source that the short sharks attacked Goldman Sachs (GS) and drove it through $55 and it settled just pennies above it. This is well below it's IPO opening day
and brings the eight years of the genius Hank Paulson premium to a net zero minus (right, see total GS chart since IPO). GS is down this year from 200 to 55, and there is air below. Now the shorts will get daring and try for an all crash. The attack on Citi continues, and two sources email that Citi is about to follow AIG into a ward of the state. The question, can Morgan, JPM and BAC be far behind, and BAC was down big today. The gallows standup artists on the Calculated Risk blog recommend reviewing escape plans. My favorite remark so far today came from "Hank Paulson's Mother: Note to the House and the Senate: If you don't pass the TARP, the stock market will tank. Wait, what week is this again?" How does it go again? We won't want Professor Larry Summers to replace Hank Paulson in the Santa Claus for Banks role, because he is mean to professor girls, but it's okay to drop in Jon Corzine of New Jersey, because he handed GS to Hank Paulson before the IPO.
Since I seem to be taking on the role of either court jester or resident optimist on this blog, I feel it's my duty to point out that the price of a gallon of 87 octane unleaded has fallen just over 50%, from $4.59 to $2.29, over the last 4-5 months here in California.
Because I had the good sense to keep my life savings in cash, and the stocks my Mom has just seem to keep treading water or even going up no matter what - God loves little old ladies, make no mistake - I still think that my family and I are in better shape financially than we were 6 months ago.
Now, I work in a field related to healthcare, so if Emanuel carries through on his threat to put through Universal Health Care (and it's of the single-payer variety) then I'm sunk to the bottom of the Mariana Trench. I will have to irritate fellow bloggers by underwater pneumatic tube from that day forward. For the meantime, though, things could be worse.
This is a strange game we play. EVERYONE knows that we are headed lower, but the market is just - shocked! shocked! - that we close below 8,000.
Meanwhile on CNBC's main page is a call to go below 6,400 in less than a month:
http://www.cnbc.com/id/27799264
Things are going south people and it's going to be worse than you or I can imagine.
I've got family that lived through the Depression. I can imagine a lot...
Reminds me of the eye being unable to see itself. Clearly, all the remedies are wrong. The government is dealing with symptoms only, and doing it in a way as to make the recession worse and last longer. Denial is everywhere. Good point about the restaurants still being full. I've noticed as much myself. Their time will come as well.
Who will weather this storm? Alaska? Brazil? Canada? ...India? It'll surely be somewhere out of the way; somewhere sheltered by tradition-inspired isolationism and/or religion - as by a cove.
Could the men and women who gave out IOU's indiscriminately to the undeserving not have foreseen what could happen? When will we begin demanding scalps? 9/11 was small change compared to this. Bin Laden should be lionized. In his way, he warned us of what would happen by pushing Sisyphus' rock just a tiny bit. Perhaps he knew that we ourselves would take it the rest of the way down; perhaps he thought we might learn from being shown the abyss. Apparently neither was the case. We’re just as clueless now as before; spastically clutching at disgraced messiahs to save us from ourselves.
It's all scary.
Can the $700 billion TARP cover the $50+ trillion ponzi scheme in CDS? No.
Congressional hearings today forgot to note that for the last 30 years Congress aided and abetted Detroit's bad behavior -- expensive gas guzzlers that can't compete, high priced SUVs that don't have to meet mileage standards because Congress allowed them to be classified as trucks, allowing trucks to be exempt from mileage standards. Also, quotas for Japanese cars in the 70s.
However, Barney Frank did learn something today. He learned that in order for GM to do bsns in China, we had to give it a reciprocal trade agreement to sell Chinese cars in the US. Mr. Frank noted that the US has no such reciprocal trade agreements w/ China-- but we should. Duh? Wasn't he involved in past trade agreements?
So it looks like, even if the bailout to the Big Three helps, cheap Chinese cars coming soon to a dealership near you will put the final nails in Detroit's coffin.
Default on home mortgages in a good economy caused the banks and markets to crash. Now that the economy is really bad and getting worse, people are losing their jobs. These new jobless will be another group defaulting on their mortgages.
The commercial real estate market is beginning to go sour, which is not good new for banks or the economy.
Where does it end?
Oh, and by the way, the U.S. apparently just sent a missile deep into Pakistan that hit its mark. That's always a crowd-pleaser.
WHY ISN'T GM GOING INTO BANKRUPTCY?
The conventional wisdom is that nobody will buy a GM car if the company is in bankruptcy. That's why.
However, is it possible that Wagoner doesn't want to put GM into bankruptcy because he might personally lose part of his fortune by restructuring? That is, maybe common stock owners, preferred owners, etc will be wiped out by bankruptcy. I don't know. But, I don't think anyone in Congress asked him this today.
JB no comment on the Somali Pirates. Was it the Russians or KSA trying to get oil to rise. Where is the American navy or marines from the shores of Tripoli. It was heartening to see them offer aid during the tsunamis in Indonesia and Burma and doing the job on Katrina. Are we until breakpoint to avenge Black Hawk Down before end of this administration or does this administrationwant to show the fecklessness of incoming administration to getting UN approval for action.
Please call Gasparino on Buffett's problem . He abetted Greenberg in AIG but was not part of Spitzer investigation. Now he gets liquidity by selling CDS ten years in future to be able to dump in GS and GE which are also being swept under in current economy. That is why BH with over half its income from insurance business is tanking.
So lets see besides auto, we have banks and insurance industry especially if we go to universal healthcare also losing vast sums of jobs permanently. Its great that we have the hot air AGW creating 5 million new jobs. Oh wait, EU just cancelled there 10 to 12 clean coal plants partially admitting that it is a croc.
May be they haven't done it yet because it is not yet necessary. Like the banks, they seem to be willing to take our money. Like the banks, we should have let them sink like a rock.
Lou:
I agree. Gas is 1.69 where I am, although I am not in an industry tied to healthcare, I have my own job demons. My boss would like to can me because she disagrees with my blog. Never mind it's against policy to retaliate because of political creed. Intellectual terrorism is alive and well.
Jim,
I know all about intellectual terrorism - my wife's family is very liberal (hybrid cars, Sheila Kuhl-style single payer healthcare, soak the rich, alternate "lifestyles", etc. etc.)... as bad as you could imagine. So I go intrepidly into the annual family Thanksgiving dinner next week vowing not to ruin it this year... for a change.....but they are on me like stink on a monkey before I know it. I'm already getting heartburn thinking about it. It doesn't help matters that Bush has been a no-show for the last few months.
It seems to me that the world's economy is now suffering from two only loosely connected tsunamis of financial tumult. The first one and the most prominent is the credit freeze that the financial capitals and titans of the world are tackling the best they can. The second, more troubling one and least mentioned, is the collapse of the consumer, specifically the American consumer. Also, often left unaddressed is the
hard reality of oil prices that peaked at $147 a barrel in early to mid July and have since fallen, mainly on demand erosion, to below 55 dollars a barrel. I argue that we are now living through the after shock of the July oil spike that finally reached a threshold that spooked the American consumer. Perhaps the oil spike of the past year or so put added pressure on the sub prime borrowers, who subsequently started defaulting at a rate high enough to initiate the credit crisis among the world's banks. While much attention is on those banks, the "toxic" assets, and the underwater borrowers, little has been directed toward the great engine of the world -- the American consumer.
With gas prices falling quickly throughout the country, toward and through $1.50 a gallon, consumer help is on its way as a corollary to the pending/in progress global recession/depression. The real problem for the economy is an overreaction by businesses to a onetime fall off in consumer purchases directly related to the mid-summer oil spike and encouraged by the gloom and doom speak of Wall Street and Washington. These consumers, buoyed perhaps by the renewal possible with a new President and falling gas prices, have the potential to come back stronger than ever, but not if stories and tales of firings and rising unemployment dominate the new cycle.
The key then, as I see it, is to preserve the private sector jobs, as much as possible during this temporary economic hiccup. If I was advising the powers that be, I would recommend setting up a mechanism for short-term low interest or even zero interest loans to businesses from the treasury on the condition that they preserve their employee's jobs. This unprecedented economic ripple, moving at rapid speed through the world's economy, can be endured in short order, if no one panics and over-corrects.
We are in the midst of vast sums of taxpayer money being spread around in an attempt to mitigate this crisis. All of which can still be overcome and affordable should our economy recover and grow at a decent clip. However, there may be no end to the spiral of debt and inflation if the economy goes into a shell for too long a time. The key to preventing this retrenchment is revitalization of the much vilified American consumer.