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Dow Jones Headed Down: Going Under 5,000

October 16th, 2008 Leave a comment Go to comments

Now the reality is sinking in, markets are continuing the long overdue correction. The reality:

  • No, the bank bail out will not stop recession, indeed economic depression.
  • Yes, nationalising each country’s banking industry in part marks the biggest failure of capitalism ever.
  • Yes, the problems are systemic and will take deep systemic answers.
  • No, no one has a clue what should be done.

This means it is impossible to value stocks and shares. Buy BT? Well .. it might be nationalised next week. Anything essential to the economy may be nationalised to save it reducing shareholder value to nil or near to nil. If it isn’t essential it will be allowed to weaken and/or fail.

There do not appear to be returns for equity investors for the foreseeable future. As it is impossible to value stocks the market will plummet. Every time a few silly investors or sillier central banks buy the market it will be against a wall of selling orders. The Dow will be below 7,500 by Christmas and probably below 5,000. It may be there by the end of this week or next. it’s hard to tell exactly when reality will really bite when so many people are hiding heads in the sand still.

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