Thursday, November 20, 2008

Can't Fight that 2002 Feeling Anymore

We're back near the 2002 lows. The financial sector is down nearly 6% so far and 67% year-to-date.  Goldman Sachs ($GS) once traded at $234, and is now around $50.  That's a "must own" all the way down, right?  And what about Citigroup ($C)?  Down to $5.25 as I type. Something very bad is happening at $C.  Leading indicators shows .8% decrease.  The Philly Fed Index came in at -39.1.

Everything is gloomy.  How can anyone sugarcoat this?  It's not possible.  The ramifications to most folks probably hasn't even been felt yet.  Companies will downsize.  Government revenues are going down much further than they are today.  Government employees are at risk. 

My grandfather lived through the Great Depression 1.  He told me stories about how bad it was.  Nothing like those of us in our prime have seen.  He always told me to pay for everything in cash, and to never go in debt.  He said folks in debt back in the 1930's lost everything.  Unemployment reached in mid-20% range. 

I'm an optimistic guy.  I see the malls, casinos and restaurants here, and they all look pretty busy.  I think the analysts are missing the additional cash folks have in their pockets due to falling gasoline prices and even smaller mortgage payments.  Yes, many have gone back to renting as their homes were foreclosed on or they were able to renegotiate with their bank.  I think that is providing some stimulus that will be showing up in the numbers at some point.

Here in 2008, the stock market is now back to where it was in 2002.  To paraphrase John Belushi in Animal House, "Six years of investing, wasted."

Do you remember 2002?

  • January 8 - The No Child Left Behind Act is signed into law by U.S. president George W. Bush.  (Gee, how's that one working?  Are there any children being left behind?)
  • February 3 - The New England Patriots beat the St. Louis Rams 20-17, in Super Bowl XXXVI in New Orleans.  (I had the Rams in this one.  Lost.)
  • February 8–24 - The 2002 Winter Olympics are held in Salt Lake City, Utah.
  • March 30 - Queen Elizabeth, The Queen Mother dies in her sleep at the Royal lodge, aged 101
  • April 1 - Maryland defeats Indiana 64-52 to win the NCAA Men's Basketball Championship at the Georgia Dome in Atlanta, Georgia.
  • May 26 - The Mars Odyssey finds signs of large water ice deposits on the planet Mars.
  • October 2 - The Congress of the United States passes a joint resolution, which authorizes the President to use the United States Armed Forces as he deems necessary and appropriate, against Iraq.  (But wait, I thought the Democrats in Congress all thought this was a bunch of lies?)
  • October 27 - The Anaheim Angels defeat the San Francisco Giants in Game 7 of the 2002 World Series to win the title.  (Seems like yesterday - The rally monkey!)
  • November 5 - The U.S. Republican Party maintains control of the House of Representatives and gains control of the United States Senate.  (Ah, great to be a Republican back then).
  • November 6 - The U.S. Federal Reserve System drops its primary discount rate by 50 basis points to 0.75%, putting the real interest rate solidly below the inflation rate.  ("The more things change, the more they stay the same." - Cinderella).
  • November 25 - U.S. President George W. Bush signs the Homeland Security Act into law, establishing the Department of Homeland Security, in the largest U.S. government reorganization since the creation of the Department of Defense in 1947.  (That'll be the answer to a trivia question someday).

Lets hope the Rally Monkey helps us as much now as it did the Angels in 2002.