Thursday, December 11, 2008

Stocks Down, Commodities Up, Innovation To Be Found

The roller coaster ride continues with volatility now being hailed as "permanent" by some pundits in the "new" investing environment. Whenever I hear the word "new" and any kind of financial advantage tied to it, my initial instinct is to to liquidate all positions, break out the survivalist gear and head for the hills, because it's almost certain that the market is about to blow down again.

Remember the "new economy" tech bubble of the late 1990s? all of those whiz-bang internet start-ups ended dreadfully circa 2000. Most of them went completely belly up, some survived as mere shadows of their former market capitalizations when it was determined that having a .com at the end of your company name did not automatically imply a valid business plan.

So, please refrain with any "new" ideas. The newness of subprime, interest-only loans, ARMs, packaged SIVs and derivatives have bequeathed today's investors with toxicity throughout all markets, lack of direction and general malaise in almost all earth-bound economies. There's nothing new about this current stock market condition except that the only reliable model is that of the era from 1929-1934, otherwise known as the depths of the Great Depression.

Not that I am one to throw cold water on humping dogs just to ruin their pleasure, but the frequent comparisons are becoming more and more commonplace, and the stock charts stunningly similar. In case you think I'm joking, take a look at two charts of the Dow Jones Industrial Average (each of these links will open in a new window). The first is from August 1, 1929 - December 10, 1929. Then, look at this one from August 1, 2008 - December 10, 2008.

Eerie, huh?

What may be more frightening is the future. If one extends that 1929 chart out to January 1934, when the market finally began to recover, one would see that the bottom was somewhere around 50 (actually 41), from the September top of 380. If you wish to make the comparison, using the August near-top

I continue to make my case that we are now in the early days of the 2nd Great Depression. I know many readers are turned off by this, having been fed the pablum of the masses via mass media on TV and over the airwaves, but I am only reporting what I see happening and comparing it to a previous economic epoch upon which few are well-educated.

Over the coming months, I'll give you not only the bread line stories, but methodology by which you can survive and, hopefully, prosper during what will be very trying times for many. One place to begin looking for success is within the medium which you are now viewing. The internet is one of the greatest business tools ever devised. Many small, medium and large businesses are not only holding their own during this pressing period, but improving, innovating and growing. It was the same during the original Great Depression. While many established businesses were failing, some others were innovating and becoming prosperous. It took a good deal of guile, intuition, blind faith and luck, but there are success stories already emerging. Another area is the "green" environmental movement, which is taking cast-offs and turning them into useful products, recycling waste into energy and producing innovations in everything from building materials to energy.

Dow 8,565.09, -196.33 (2.24%)
NASDAQ 1,507.88, -57.60 (3.68%)
S&P 500 873.59, -25.65 (2.85%)
NYSE Composite 5,504.73, -126.34 (2.24%)

As for today's market of overpriced stocks with convoluted accounting regimes, most of them were losers. Decliners beat back advancing issues, 4947-1730. New lows surpassed new highs by 206-16. Volume remained static.

NYSE Volume 1,469,365,000
NASDAQ Volume 2,078,145,375

While stocks were taking another one on the chin, commodities were offering proof that speculation is not yet dead. Oil advanced by $4.46, closing at $47.98. Gold finished at $826.60, up another $17.80, building off multi-session gains. Silver also gained, adding 23 cents, to $10.43.

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