Outotec has been selected for the third consecutive year to the Dow Jones Sustainability Europe Index for 2015-2016. What you are see here is a very close reproduction of actual Dow numbers you hear every day in the news, you know, the one that keeps trying to top 15,000 but doesn’t quite do it. On the chart are several significant dates with reference numbers attached which you can find in the table below to see their meaning. CHART 3, Not coincidentally, housing prices, which had been skyrocketing to historic levels based on nothing but the belief the increases will never stop, also stopped in early 2006; plummeting faster than they rose. The short-lived upswings you see on Chart 8 in this period are brief profit-taking episodes.
CHART 4, Historically, since 1937 anyway, real estate has always been funded by traditional banks, often backed by government sponsored enterprises (GSE) like Freddie Mac. It was this announcement by the Fed and reports from Bear Stern and Goldman Sachs of beating earnings estimates that pushed the Dow Jones to its final high on October 10, 2007, 78 years and 36 days after the market reached its peak in 1929. 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.
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. It was the final shock needed to unhinge everything and send the avalanche of five years of accumulated snow crashing down on an unaware and fooled American public and on a newly elected president who was to face the most uncooperative and vitriolic opposition party the nation has seen in modern American political history. Chart 1 depicts all economic downturns as listed by the National Bureau of Economic Research (NBER).
History now tells us, President Bush chose the TARP program, one of the two major reasons America did not end up in a depression; the other reason was President Obama’s stimulus initiative. The bail-out took the form of the $700 billion Troubled Asset Relief Program (TARP) where the government would, in essence, protect those companies holding portfolios containing assets which have lost their value from going bankrupt. This will give it a better reflection of how the free market values these companies.
Conservatives believed these companies should simple take their lumps and let what happens, happen, not believing the doomsday scenarios laid out by economists; they resisted strongly in the legislative and media battle to pass this legislation. If you focus on Chart 2 and read it from left to right, you should notice a multitude of tall spikes occurring every few years; these represent large recessions or depressions.