WSJ–May's Big Selloff Could Be Just the Beginning

Like last week, with stocks lurching wildly with the headlines — up by triple digits one day, down the next. For the month, the Dow Jones Industrial Average dropped 7.9% and is negative for the year. The Nasdaq Composite and the Standard & Poor’s 500-stock index also are in the red for the year.

Some pretty smart people are cautious. Seth Klarman at Baupost Group is worried. John Hussman of the Hussman Funds says all sorts of warning lights have lit up across his screen. Even Ron Muhlenkamp of the Muhlenkamp Fund, who usually takes a sunnier view of things, says he has moved a big chunk of his mutual fund into cash in case there’s a plunge.

How far will it go? Mr. Hussman says the technical indicators have only been this bad 19 times before in the last half century — and on average the market plunged about 20% over the following 12 months. When markets were also high, like now, the picture’s even worse.

Ugh.

Read the whole thing.

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Posted in * Culture-Watch, * Economics, Politics, Credit Markets, Economy, Euro, European Central Bank, History, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Stock Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--

6 comments on “WSJ–May's Big Selloff Could Be Just the Beginning

  1. Dacama says:

    My technical indicators, at this point are showing a nice rebound in prices will occur. They do not say how long it will last though.

  2. Kendall Harmon says:

    One positive is that sentiment is turning negative, as this article indicates.

  3. Sick & Tired of Nuance says:

    They have “fixed” nothing. The chief difference between now and September 2008 is that we have more than a Trillion dollars larger debt load than we did then. The currency is worthless, but people don’t realize it yet. It isn’t “money” any more (if it ever was), it is debt certificates with a sliding scale. The M3 velocity is near zero or in negative territory – there is less money…it’s called a deflation or a depression. Look for more market manipulation as the nations try to bail out the economy with yet more sovereign debt. That, in it’s turn, will lead to excessive inflation – possibly hyper-inflation.

    They are trying to bail out the life raft with a fire hose that is spraying yet more water into the raft.

  4. Clueless says:

    Agree with #3. Deflation followed by excessive inflation. (I pray that it will not be hyperinflation, as that is the setting where civil war becomes a possibility).

    I do hope that everybody has food and water stocked up and their debts paid off. When the O initiates price controls in order to stop “gouging” by the “greedy farmers” food will disappear. Me, I am pleantly supprised by how much produce can be grown in a back yard, and I hope to add fish farming soon. Alas my neighborhood council made me give up the chickens.

  5. Sick & Tired of Nuance says:

    #4 Could you get by with rabbits? I know they don’t produce eggs, but they are quiet and reasonably tasty. (The fact that many folks have them as pets might be a plus.) Also, would they object to what is known as Guinea Hens? These are often used as pets and to keep tick populations down.

  6. Clueless says:

    Alas Guinea Hens are considered “poultry” and my council bans all types. (I really don’t understand why as hens are quiet, and do not need a rooster to lay). Rabbits would probably be okay by the council, however I do not think I could avoid getting attached to them, so they would simply be another mouth to feed, (or a pest in the vegitable garden). No, the plan, regarding protein currently revolves around breeding catfish as a crop in my 150 gallon aquaria, and then letting the fingerlings increase in size in 300 gallon outdoor tanks. I do not know if it will work, but I have good hopes for it. Last year’s vegitable garden was pretty feeble compared to this years, so I am able to learn. Right now we are drowning in Spring crops which have used up all available freezer space. Next weekend’s project is to learn how to can.