Econo-clash: When stocks hit 5-year low, do you cry?

November 19th, 2008, 3:50 pm · 11 Comments · posted by Jon Lansner

Simple recession? Big depression? That’s what confronts our economy. To help you better understand the business climate’s challenges, here’s another round in ongoing debates about economic conditions between two veteran Register business journalists — Colin “Mr. Optimist” Stewart and Jon “Mr. Pessimist” Lansner.

Mr. Pessimist: Stock market is at five-year lows. The Dow’s under 8,000, no less! The financial crisis has already wiped out $6.69 trillion of value from the S&P 500 since its October 2007 high! You just want to cry. (MORE!) Are you going to tell me this is what a bottom looks like? Ponder this quote: “I don’t know what the catalyst is going to be where we turn the corner and people start buying stocks wholeheartedly again,” said analyst Jon Biele at Cowen & Co.

Mr. Optimist: Of course a stock analyst doesn’t know when the market will turn the corner. But have no fear — it will happen. That’s why investors need to avoid the temptation of selling all their stocks: If they do that, they’ll miss the beginning of the rebound. Brave investors could even buy shares right now, convinced that they’re snapping up bargain prices not seen for years.

Mr. Pessimist: Speaking of deep discounts, The Register’s Fast Food Maven Nancy Luna got a great quote in a piece on ailing restaurants: “The coupon will dictate where I go for lunch,” said Amanda Wormley. (MORE!) That says a bunch about consumer’s lower-the-price psyche.

Mr. Optimist: Tight-fisted American motorists are helping to ease the nation’s addiction to foreign oil. We drove almost 11 billion fewer miles in September, according to the Transportation Department. (MORE!)

Mr. Pessimist: Look even at some seemingly good news. Experian PLC — the credit-history trackers who run their U.S. work out of Costa Mesa — saw first-half profits rise 15%. Not bad. But how did they do it? Strong growth in Latin America and — a $70 million cost-cutting program! (MORE!) Can society cut its way to prosperity?

Mr. Optimist: New jobs are coming! That’s because the FDIC is moving into offices in Irvine with space for 600 employees. It’s hard to smile at the reason for the expansion, though: The office will run troubled financial institutions and sell off the assets of failed banks in Western states. (MORE!)

Mr. Pessimist: I guess the big question is: “Have we discounted enough?” Ponder local home prices — also at a 5-year low, just like stocks. By one measure of affordability it is six times easier to pay for a home in Orange County, thanks to tumbling housing values. That assumes anyone would lend to you, of course! But that still leave Orange County with the 11th worst home affordability in the nation! (MORE!)

Mr. Optimist: The Federal Reserve sees trouble ahead, but they’re not totally grim. In the Fed’s latest forecast, the U.S. economy will grow something like 1.1 percent next year, or perhaps will shrink 0.2 percent. Inflation will drop from about 3 percent this year to 2 percent or less next year. (MORE!) That’s not terrible news.

Posted in: Meltdown • econoclash

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Bill says:

November 19, 2008 at 6 pm

“Of course a stock analyst doesn’t know when the market will turn the corner”

Check your facts.

The stock market has historically been the best predictor of a recovery on average 8 months ahead of time.

I understand it’s hard to tell the truth being an optimist when 99% of economists are predicting worsening conditions to come.

The Long Beach docks are at maximum capacity, flooded with new imported cars that can’t be offloaded to dealerships due to their own lots being at full capacity and a number of dealership closings.

Let’s all pretend like this isn’t happening and put our heads in the sand like Mr. Optimist is.

Here’s 30 more reasons why Mr. Optimist is wrong.

http://www.marketwatch.com/news/story/Well-Great-Depression-2-2011/story.aspx?guid={B28B49B5-EFD1-4941-B57E-A2BA1545BA09}&dist=SecMostRead

bloodinthestreets says:

November 19, 2008 at 7 pm

Do people create artificial reefs from unwanted cars for expanded aquatic habitat? People do!

Republicans are TRAITORS says:

November 19, 2008 at 8 pm

Anyone that quotes the federal reserve forcasting as evidence is clueless. Colin, the federal reserve is the reason we are collapsing. They have been totally discredited. They have made the problems worse by bringing over 2 trillion in liabilties to the US Taxpayer and worse of all, none of it needed to happen but the greed of Alan Greenspan et al. after the dot com destruction has brought a collapse that will only be rivaled by the Great Depression I.

Picky Boot says:

Each and everyone of us are very eager to see when the market will turn its corner. Though Federal Reserve has delivered that there will be change in the situation, but its not sure. Most of them are hesitating to invest due to the current situation.

no says:

November 19, 2008 at 11 pm

I cry because it’s not 15-year low. When it hits 20-year low, I’ll LOL because that’s where it should be. I predict DOW will drop to 2500 at the end of 2009.

anonymous says:

November 20, 2008 at 8 am

2500? by the end of 2009 are you serious???? or are you just feeling really bearish this morning?

mav says:

November 20, 2008 at 9 am

someone who is feeling really bearish would say DOW 1400 is in play……

http://1.bp.blogspot.com/_pMscxxELHEg/SSSevkxwNtI/AAAAAAAADzE/V_BMgbRML4E/s1600-h/four-bears-large.gif

Understanding the fundamentals of 2009/10 is difficult to forecast…. but I would say DOW 3000 - 6000 is a reality……

Moopheus says:

November 20, 2008 at 10 am

“Of course a stock analyst doesn’t know when the market will turn the corner”
Check your facts.”

He didn’t claim the market wasn’t predictive, he claimed analysts weren’t predictive. A totally different thing. Analysts are basically salesmen. Therefore they will always say it’s a good time to buy. Because the last thing they want is for people to decide not to play in the Wall Street Casino any more.

November 20, 2008 at 5 pm

Doopheus,

What rock did you crawl out of?

There are plenty of stock analysts that are advising against the stock market.

Jimmy Rogers, Peter Schiff, Marc Faber, Max Keiser, Nouriel Roubini, Lyndon LaRouche, Michael J Panzer and thousands more.

CNBC always matches a bull analyst with a bear analyst during debates.

Unlike realtors, stock analysts don’t have to take an oath promising to be lifelong bulls no matter what consequence it has on their clients.

doublechin says:

YOU ALL HAVE TOO MUCH TIME ON YOUR HAND TO BITCH-SLAP ONE ANOTHER 24-7.

Slice	Price	Ch.	Sold	Ch.
House	$500,000	+18%	1,833	+11%
Condo	$290,000	+7%	881	+22%
New	$617,500	+24%	171	-17%
All OC	$435,000	+10%	2,885	+12%

Orange County Register