We will work with your market data services to bring all of your teams the most economical package for your firm. ASIDE: Following the low reached on Oct 24, 2007, resulting from lowering home prices and spiking oil prices, the end of October saw good earnings reports from America’s businesses AND another rate cut from the Federal Reserve, that drove the market up to a local high on Oct 31, 2007 given it fell back sharply the next trading day. Note, from Chart 8, this high was not as high as the market high on Oct 10, and, in fact, is about as high as what I identified as the Left Shoulder in the previous Aside. The short-lived upswings you see on Chart 8 in this period are brief profit-taking episodes.
Back On Point: There is no good news any more other than corporate earnings, they still seem to be strong, except in the financial sector; only because the full impact of rising oil prices have not been felt yet. The economy is now all about the housing market, the stock market, and the credit market; it is clear to all now the former has collapsed, it is just dawning on those in the know that the latter is going to collapse, and the stock market is finally acknowledging that fact.
All of these factors conspire to push the stock market, and America’s hopes along with it, up for the next 15 days, until Dec 15, 2007 when the inflation report came out that wiped out all of the good feelings and sent the market crashing down again. By May 19, 2008, it was all over but the shouting for the stock market, and America as it turns out.
Although you can’t see it in Chart 7, GDP Growth, the end of Sept 2008, was the first of two consecutive quarters of the negative growth needed for the official declaration of a recession. The fall of Lehman Bros, was the Knickerbocker Trust Company of the Panic of 1907, or the Philadelphia and Reading Railroad of the Depression of 1893, or the Vienna stock market crash of the Long Depression of 1873. Chart 1 depicts all economic downturns as listed by the National Bureau of Economic Research (NBER).
From 2003 to 2006, America saw an unprecedented and unsustainable growth in housing prices and construction based only on greed; there was no fundamental reason in the real estate marketplace to have caused the type of growth that was experienced. And, if those investments made up a significant portion of that company’s assets, then they were as vulnerable to failure as Lehman Bros was; that was most of the big financial institutions on Wall Street.