Dow Plunges 733 Points
Rapidly Declining Retail Sales and Gloomy Beige Book Sink Stocks
Reno, NV (Marketmail) - October 15, 2008
Stocks suffered another major setback today after dreary economic data essentially confirmed that the U.S. economy is in recession.
September retail sales dropped 1.2%, significantly more than the -0.7% consensus and the largest decline in three years. Sales ex-autos fell 0.6%, tripling the -0.2% consensus.
Sales fell on a year-ago basis for the first time since 2002 and only the third time since 1991, according to Economy.com.
"Core sales, which we define as total sales ex- autos, gas, and food, fell 0.8% for the second straight month, pushing the three-month annualized rate down to -5.7%, the worst since the current dataset began in 1992. Another sharp drop in consumption is assured for October, and there can be no doubt now that the economy is in recession. It will be there for a while," said Ian Shepherdson, Chief U.S. Economist at High Frequency Economics.
The October Beige Book report, a survey of labor market conditions, retail sales, consumer spending, construction and real estate, manufacturing, banking and finance, agriculture, energy, and natural resources, indicated widespread weaknesses across all 12 Federal Reserve districts in the U.S.
San Francisco Federal Reserve President Janet Yellen said, "Indeed, the U.S. economy appears to be in a recession."
Marisa DiNatale at the Dismal Scientist said the Beige Book "is the first glimpse at how regional economies have reacted to the credit crisis."
The bleak news hammered the Dow with a 733 point loss, the S&P 500 with a 90 point loss, and the Nasdaq with a 150 point loss. Moreover, cumulative losses from yesterday and today wiped out the majority of Monday's record rebound, when the Dow exploded 936 points higher.
Conclusion
We're not surprised that most of Monday's rebound has evaporated. We regained too much ground too quickly. Since volatility is at exceedingly high levels, and markets often overshoot on the downside and upside, we expected some 'back and filling' to occur after the big rebound, but we must admit we didn't expect it to happen by this magnitude, this suddenly.
With the VIX Index, a measure of market volatility, above 55, we can expect significant volatility to continue in the coming weeks. As such, several 500+ point rallies and sell-offs could be in our future. It's part of the bottoming process in bear markets.
We could have a retest of the lows tomorrow or Friday. Hang in there.
...
Crew Capital Management Thoughts on Investment
Welcome to the Crew Capital Management Thoughts on Investment blog. At Crew Capital, investment education is key to how we work with our clients. We hope our conversation and analysis entice you to think further on your investment strategies and planning. For further discussion, please contact us at rjung@crewcapital.com
Thank you!
Robert F. Jung, CFA CPA*
*CPA inactve
Thank you!
Robert F. Jung, CFA CPA*
*CPA inactve
Thursday, October 16, 2008
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Crew Capital enters into a new client relationship only after it provides and obtains certain information. In addition, Crew Capital may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Every prospective Crew Capital client is provided with a copy of Crew Capital ’s Privacy Policy, Form ADV Part II and Form ADV Part II Schedule F. Also, the USA Patriot Act, passed in response to the events of September 11, 2001, requires certain financial service providers to request specific information from clients. Accordingly, Crew Capital acts to verify a potential client's identity and makes a risk assessment of their financial and business activities. Lastly, Crew Capital will not provide any investment advice or supervision without a fully executed Investment Advisory Agreement.
As a registered investment adviser, Crew Capital is required by rule to adopt and enforce a code of ethics that establishes the standards of conduct expected of all employees and reflects our fiduciary duties. A copy of Crew Capital’s Ethics Policy will be provided to any client or prospective client upon request.
Nothing on this web site shall be construed as advice to any particular investment need or investor. All references regarding investment or portfolio returns are based on historical data. One should not assume that this performance will continue in the future as past performance or results are not an indication of future performance or results.
Certain portions of Crew Capital’s web site (i.e. books, newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Crew Capital’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or substitute for, personalized advice from Crew Capital or from any other investment professional. Crew Capital is neither an attorney nor accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice.
At certain places on this site, live "links" to other Internet addresses may be accessed. Such external Internet addresses contain information created, published, maintained, and otherwise posted by institutions or organizations independent of Crew Capital. Crew Capital does not endorse, approve, certify, or control these external Internet addresses and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, timeliness, or correct sequencing of information located at such addresses. Use of any information obtained from such addresses is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference therein to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by Crew Capital.
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