Wall Street Jitters

I see where the Dow closed down more than 450 500 points today.  Ouch! 

Nouriel Roubini, an economist at New York University and frequent guest on Charlie Rose, believes the U.S. economy is in for a rude awakening.  On the RGE Monitor website [subscription required] he has written an article titled “The Coming US Consumption Bust: 12 Reasons Why the US Consumer is in Serious Trouble and Faltering.” 

You shouldn’t be surprised to read that his first three reasons are 1) consumers have been gorging at the mall and are now in negative saving territory; 2) with real estate prices falling, the home-financed ATM machines are now empty and can no longer fuel runaway consumerism; and 3) home equity withdrawal peaked in 2005 at a whopping $700bn, but has now dropped to a paltry $24bn with lenders becoming more and more wary of approving home equity loans.  You can read all 12 reasons at Fabius Maximus.

What does this all mean?  Roubini says it has been at least 18 years since we’ve seen even a single quarter of decreased spending, so expect the coming recession to be both deep and long.  He is predicting it will last at least 18 months as Americans try to pay down debt and begin putting money away again.

We’ve already lost close to 750,000 jobs so far this year and a recession this deep will mean many businesses will close their doors and more and more people will be unemployed.  But can we really afford to continue allowing China to finance our wanton spending?

Isn’t this all the more reason to get out of Iraq as quickly as possible?  And I can’t be the only person in this country who is angry that McCain and Palin don’t find this situation important enough to take seriously.  Rather they are spending their time whipping up their automon followers into a frenzy over less-than-serious relationships with a man who hasn’t been in trouble with the law for more than 40 years and taking Obama’s speeches out of context.

Just before sitting down to write this post, I did a quick calculation based on yesterday’s closing stock market.  Had we not called it quits two weeks ago, we’d be nearly $14,000 poorer today, and that doesn’t take into account the additional 450 500+ point drop today.  I do believe the market will eventually rally, but I think it will take 5-10 years to reach 14,000 again.  In the meantime, Roubini’s prediction is that the Dow will most likely bottom out at 8,000 before it begins its recovery.

Hold on, it’s going to be a bumpy ride!

UPDATE: We would have lost an additional $5K today alone.

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