Home > Stocks
Dow Declines 358 points? Phooey -- Here's a REALLY Big Number
Have you seen this simple calculation anyplace else?
The Dow Industrials lost more than three percent today, so you can expect the financial news to trout out stuff like "low for 2008" and "prices decline to levels last seen in September 2006."
That much (and more) is true, but the stock market will have to fall a lot further to get close to a number that's been a lot more painful for a lot more people: $24,300. That is the dollar figure you get when you quantify the eleven-plus percent decline in the median sales price of existing homes, since the peak in 2006 -- and that's using the data conservatively ($221,900 in 2006 vs. $197,600 through Q1 of 2008).
I haven't seen this simple calculation appear anyplace. So, dear reader, humor the repetition: $24,300. Given the choice, I'd take a three percent fall in the Dow any day of the week. While I'm at it, how does that "tax rebate check" that most of us got last month look by comparison? Heck, does it make you feel better that the mighty Federal Reserve cut interest rates NINE TIMES in 2007-2008, because "tight credit conditions and the deepening housing contraction are likely to weigh on economic growth"? Take that to your friendly neighborhood lender and see if they'll give you back any of the home equity you've lost since 2006.
If that doesn't work, maybe this will -- it's a quote from 2006 (Feb. 15), from the central bank's chairman himself:
"Our expectation is that the decline in activity or the slowing in activity will be moderate; that house prices will probably continue to rise but not at the pace that they had been rising. So we expect the housing market to cool but not to change very sharply."
In other words, "This wasn't supposed to happen." They expected your home price "to cool but not to change [by -$24,300]." Earlier this week, big-name economists were still publicly saying "we may be two-thirds of the way there" in the home price decline. It wasn't supposed to happen, and "the worst is over" with every new grim economic report. Just a moment ago, a colleague forwarded a Bloomberg article about today's stock decline, with the headline "U.S. Stocks Tumble, Sending Dow to Worst June Since Depression." The story quoted some fund manager who said, "The write-offs have been far worse than anyone would have imagined."
What a crock. Our books and monthly publications not only "imagined" what's unfolding now -- we warned subscribers EXPLICITLY of what was coming. If you participated in our just-concluded FreeWeek, today's stock market decline was NOT surprising AT ALL. And I suggest that the worst will "be over" for individual investors only when they start to rely on independent sources of information -- yes, that includes the publications that can be on your computer screen within minutes, via The Financial Forecast Service. Click here to get started.
Tags: