Mohamed El-Erian, chief executive of the bond giant Pimco, said investors were selling risky assets like stocks “globally prompted by concerns about the weakening economic outlook, spreading contagion in Europe and insufficient policy responses.”
With Thursday’s dive, the three major American indexes had erased all of the gains made so far in 2011, with the S.&P. and Nasdaq markedly below the start of the year.
Read it all and take a look at this graph picture which says it all.
We’ve got a way to go.
Dow Jones Industrial Averages
Bush high October 9, 2007 $14,165
Obama low March 6, 2009 $6,627
January 1, 2010 $10,428
January 1, 2011 $11,578
August 5, 2011 $11,383
My best guess is that the DJIA won’t break 10K – or maybe 9K. I think the market is reacting to the reality that the President and the Congressional Democrats have demonstrated that they lack the courage and wisdom to quit spending borrowed money. The people recognize that we have tapped out our credit card and getting another one is not the answer.
Maybe hitting debt equal to GDP was a little unsettling. Maybe people know 3rd quarter earnings reports are going to be anemic. Maybe today’s unemployment numbers are not going to look good. Maybe Euro default in Italy and possibly Spain with Ireland and Portugal still being sick is unnerving. Maybe the realization that we have a President whose ideological values prevent him from doing the things which would rev up the economy is depressing. Maybe the lack of any good economic news is finally being represented in market prices and psychology.