While the 2008 recession set some new records
The economists at name institutions confess to confusion
| Even if you did not rely on people whose income depends on the status quo, you still probably got burned as it’s hard to escape the system and safeguard one’s savings. Especially now as the world’s economies have not yet bottomed out. We trim, blend, and append nine 2008 and one 2009 articles from CBS MarketWatch, Reuters, Washington Post, USA Today, and the BBC. |
by Greg Robb, Lucia Mutikani, Ruth Mantell, Howard Schneider, Moming Zhou and Mark Hulbert
- MarketWatch, Jan 5: Experts Confounded
A sense of uncertainty pervaded the corridors and formal sessions of US economists at their annual conference.
"I completely agree with anyone who says there is ... no complete explanation for the current situation," said Simon Johnson, an economics professor at MIT.
"We don't know what to do. It's really a throw-the-kitchen-sink-at-the-problem strategy, said Kenneth Rogoff, a former chief economist at the International Monetary Fund.
Former Clinton economic adviser Laura Tyson said, "It is very hard to predict when the situation will turn around.” The downturn has become "self-reinforcing downward-spiral effects going on -- from the housing market to the credit market to the real economy and back to the housing market.”
JJS: Amuses me that houses escape being part of the real economy. Yet at least she did mention them, tho’ she did fail to note it’s not the building, which ages, but the location, never created by anyone, that fluctuates in value. And fluctuates wildly if it is an object of speculation rather than have its value recovered and shared. Meanwhile, the 18-year land-price cycle has not yet reached its nadir and probably won’t until for at least a half-year and remain banging on its bottom another year.
- Reuters, Jan 6: Home sales tumble to 7-year low
Contracts for purchasing homes signed in November dropped 4.0 percent to 82.3, the lowest level since the series started in 2001.
November's reading was 5.3 percent lower than a year-ago and October's pending home sales index was revised down to 85.7.
The yearlong recession is on track to be the deepest since the 1981 economic contraction which lasted about 16 months.
JJS: Naturally, when demand falls, price does, too, followed by output, then by stock values. Normally, that sends people seeking shelter into gold, but not so much this time around for some undisclosed reason.
- MarketWatch, Dec 30: Drop in home prices and consumer confidence sets record
Home prices are back to their March 2004 levels, according to the Case-Shiller price index, having dropped in 20 major US cities by 2.2% in October and by a record 18% from the previous year. The main force driving house prices down are foreclosures, which are still rising. For Case-Shiller's original 10-city index, prices fell a record 19.1% in the previous 12 months.
Consumer confidence hit a record low in December, falling to 38 from a downwardly revised 44.7 in November.
- Washington Post, Jan 2: Manufacturing Falls to 28-Year Low
US manufacturing fell sharply in December by 3.8 percentage points compared with the month before, to 32.4, the lowest level since 1980. A reading below 50 indicates a decline.
It is the fifth consecutive month of decline, and the drop registered not just in production but also in employment, prices, and backlogged orders. New orders and prices are at their lowest levels since the late 1940s.The Institute for Supply Management's has conducted its survey since 1931.
Polls of purchasing managers through Europe and Asia showed similar declines.
- USA Today: Stocks close out worst year since 1931
By Nov 20, the S&P had hit an 11-year low, wiping out memories of record highs reached just 13 months earlier.
For the year, the Dow dropped 33.8%.
The biggest decliner on the Dow was General Motors, which fell 87.1%. On the S&P, the biggest loser was insurer American International Group, which fell 97.3%.
Only two stocks in the Dow ended higher for the year: Wal-Mart Stores and McDonald's, places that get plenty of poor customers.
And the number of poor customers is growing. The number of people still claiming benefits has climbed to the highest level since 1982.
- BBC, Dec 30 & 31: Many stock markets see worst year ever
Japan has the world's second-largest economy, but when overseas demand in 2008 shriveled, many foreign investors withdrew their money from the Japanese market. The Nikkei lost 42% of its value, its worst year on record.
Shares in Toyota, which is Japan's top carmaker, lost more than half their value. The company forecast its first operating loss in 71 years.
Shares in Sony, The Tokyo-based maker of the Walkman and PlayStation, fell more than 60% during the year.
The last time in its 58-year history the Tokyo stock exchange suffered a fall of similar magnitude was 1990, at the beginning of a prolonged economic slump, when the Nikkei fell 39% during the year.
Around the world stock markets saw record falls in 2008.
Britain's FTSE 100 had its worst year in its 24-year history, down 31.3%, with similar falls in Paris and Frankfurt.
In Frankfurt, the Dax-30 ended 2008 down 40%, which was the index's second-worst annual performance in its 20-year history. The index had risen 22% in 2007.
In Hong Kong, which is in recession, the Hang Seng index closed the year 48% lower. This was its second-biggest drop to date and its worst since the global oil shock of the early 1970s.
In many cases, markets that had swollen the most shrank the most. Shanghai soared more than 300% in 2006 and 2007 and ended the year 65% lower, which was also a record loss.
- 2008 - MAJOR MARKET FALLS
New York - down 33.84%
London - down 31.3%
Frankfurt - down 40.4%
Paris - down 42.7%
Sydney - down 41.3%
Tokyo - down 42.1%
Hong Kong - down 48.3%
Singapore - down 49.2%
Mumbai - down 51.9%
Shanghai - down 65.2%
In many cases, markets that had swollen the most shrank the most. Shanghai soared more than 300% in 2006 and 2007 and ended the year 65% lower, which was also a record loss.
- MarketWatch, Dec 31: Gold moves up, ending higher for eighth year
Gold for February delivery closed at $884.30 an ounce on the Comex division of the New York Mercantile Exchange. That ending price was higher for the eighth straight year -- the longest winning streak since at least 1980. However, the metal's annual return of 5.5% is the smallest since 2004.
Gold futures had surged 20% in the first three months of the year to a record high above $1,003 an ounce in March. Since then, it had fallen more than $300, or 30%, to below $700 in October.
In other metals trading, March silver futures ended at $11.295 an ounce. Silver fell 24% in 2008. April platinum finished at $941.50 an ounce and March palladium at $188.70 an ounce. For the year, platinum lost 38% and palladium dropped 50%.
JJS: Investors overreacted and oversold stocks but under-reacted and under-bought gold. Are they hoping for a quick stock turnaround?
- MarketWatch, Dec 31: Stocks' year-to-year returns largely random
Last year, 2008, will still go down in history as the third worst since the Dow was inaugurated in 1896. For the full year, the Dow lost 33.8%. The two other years in which the Dow did worse were 1907, when the index lost 37.7%, and 1931, when the Dow lost 52.7%.
Does the stock market tend to bounce back after losses as big as 2008's? Sometimes yes, sometimes not. Even though the stock market doesn't automatically bounce back after terrible years, an additional bad year isn't preordained, either.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: This bear market is one for the history books
Forensic economists can now measure corruption
The solution is reversing deficit spending |
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