Sunday, April 17, 2005


Silence Is Golden?

Interestingly enough, I haven't seen hardly any mention of this week's stock-market disaster mentioned in the "blogosphere". I gotta be honest and state that I'm not sure of anyone who consistantly blogs about economic matters from a conservative viewpoint (InstaPundit, LGF, and Power Line almost never touch that topic), and those that do the same on the left (Billmon and DeLong) have been oddly silent (both chosing instead to pile onto Tom DeLay). Centrist Matt Yglesias, who seems to have an increased interest in economics recently, hasn't touched it. Even Atrios, a economist by training, hasn't typed a word on the matter. About the only thing I've uncovered is a single post on Daily Kos, which didn't shed much light on the issue of the Dow Jones (but did to a "diary" including some interesting comments on the bond and oil markets). Nothing on the discussion forums I frequent, either.

Odd, since it seems like just about any faction could make use of the info. Liberals could use it as evidence of the ineffectiveness of the current tax policy. Republicans might call for further tax cuts to provide additional stimulus. Fiscal conservatives would point out the current account and trade deficits and point to those as possible causes. But no one seems to be taking the bait.

So with no expert independent opinion available, and certainly nothing of substance from the mainstream media, we're left only to guess at the significance of the recent market events. First is the possibility that we're headed towards another slowdown, as the stock markets are often a "leading" indicator. Could we be headed towards a recession? Quite possibly, which would be really depressing considering that those of us here in the midwest never quite experienced the last recovery. Is it just a slight adjustment, an acknowledgement that the run-up in last '04 wasn't justified? Maybe. Is the market finally reacting to the precarious situation that we've found ourselves in, with record trade deficits and no real effort from Washington to reign in spending? I bet there's a bit of that baked into it.

Regardless of the reasons, this coming week will be critical. Any sign of weakness on Monday will cause the market to dip below 10,000, and my guess is once that happens, we're going to see a new bottom for the market. Where that might be - 9500? Lower yet? - remains to be seen, and there's a chance that the market will simply rebound to the 10,500 area if investors see stocks as underpriced on Monday.

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