Wall Street Volatility Hitting Main Street Prices

By Jim Wiandt

As the global economy implodes and oil dips below $40 a barrel, Matt Hougan looks like a genius once more.

Even OPEC is now looking desperate, taking 2 million barrels a day out of the supply chain and not even sending a ripple of upward price movement into the markets...

I'm sorry, I know I'd promised to take my eyes off the market, but it's like not looking over at a car crash as you crawl past the wreckage after waiting in a very long line of rubberneckers. I want someone to come in here and comment with one good thing they're seeing in the economy right now. Credit remains tightish despite hundreds of billions (probably trillions now) of government dollars flowing through the system, the market is down, real estate is down, commodities are down, the dollar is down, debt is up, unemployment is rising, sales are down, consumer sentiment is flopping around in the mud. We must be near capitulation, right? Right?

I've decided, that I don't know anything, but I do know Someone who does. Matt, can you please explain what is going on? Give us some hope, some change we can believe in? As the One Who Knows, I've come to accept that your wisdom is The Wisdom, so tell the indexer investors around the world: What can we expect in the next year? Will Oil hit $25 a barrel? Is the dollar headed back to 1.60 to the euro, is the market going to touch 6,000? We want to know, oh Wise One.

By the way, I just opened up www.oanda.com and note that the euro has soared to over 1.46 dollars. Good lord. Weren't we just at 1.25 about 2 weeks ago. I'm getting queasy. I have never, ever seen such fitful push and pull in the markets - currency and equities in particular in my life. It can't be healthy.

The $40 a barrel thing (despite a plunging dollar) is definitely the silver lining (as is more space on my flights now, cheaper hotel rooms and plenty of elbow room in posh bars - though much less in the dives). When I was in Ohio in July, I paid $50+ to fill up a tank of gas. When we were there for Thanksgiving, that was just over $20. Insane. In 4 months, a gallon of gas went from over 4 bucks to $1.59. So the volatility is not just on the market, it's on Main Street, which is what makes things all the more disconcerting.

What sometimes seems like the fantasy world of paper money on Wall Street now more than ever directly affects average people's retirement security, their monthly budget allowance and (in the last couple of years) their food prices, even in the most remote third world locations. So it comes down to - like it or not, we're all in this together, and there's a real need to rise above the politics and find some solutions.

Merry Christmas, by the way. I'll make sure I cheer up a bit next week. I'll leave that to hopeful Hougan in the meantime.

Comments

[socrateazz:]

Too many business people are too dependant on getting loans on falling asset values. I expect many businesses to fail because there is not enough wealth in the businesses to cover needed cash. I can see the problem because I have the need to borrow. The excess wealtyh I had on my balance sheet has delined sharply due to realistic revauation based on falling asset prices. It looks like I can get my loan but not at a favorable interest rate compared to the banks cost of money. I know many folk who are underwater with the declining debt. What choices are there?...Can the business be sold? Bankruptcy may increase at an alarming rate for businesses. What choices are available? companies need excess wealth to survive downturns. Not many have it.

2008 Dec 18 07:16 AM

[Jason Rines...:]

Small businesses are the worst hit are 51% of our GDP (or was in 2007). Government will become lender of last resort to Small Businesses also. The sad part is the help is going to come a year too late to avoid mass bankruptcies. If as a Small Business you held onto cash and stayed near break even on revenues in 2008, then you're probably going to have quite a selling story to raise money with private equity next year. If not, like the rest of the unprepared society from Efficient Market back to Save and Invest you'll be getting further slaughtered. I do not mean to sound obtuse or without respect, I prefer facts over 'hope and change'.


On Dec 18 07:16 AM socrateazz wrote:

> Too many business people are too dependant on getting loans on falling
> asset values. I expect many businesses to fail because there is not
> enough wealth in the businesses to cover needed cash. I can see the
> problem because I have the need to borrow. The excess wealtyh I had
> on my balance sheet has delined sharply due to realistic revauation
> based on falling asset prices. It looks like I can get my loan but
> not at a favorable interest rate compared to the banks cost of money.
> I know many folk who are underwater with the declining debt. What
> choices are there?...Can the business be sold? Bankruptcy may increase
> at an alarming rate for businesses. What choices are available? companies
> need excess wealth to survive downturns. Not many have it.

2008 Dec 18 11:44 AM