Worst January in S&P History Bodes Poorly for Rest of 2009

Includes: DIA, SPY
by: Craig Brown

Keep those pencils sharpened as the records continue to be set.

Worst January in S&P History

You may have noticed stocks off a tad this month. Well, a tad is a tad of an understatement. The S&P was off 8.6% this month and that is a January record. And the Dow had that beat with an 8.8% drop, another January record, which is saying a lot because that beats a lot of terrible economic situations over the 113 year career of the Dow. I expected an Obama bounce and was sadly disappointed.

The linked Bloomberg article talks about the January barometer, which is based upon January setting the tone for the year. Apparently it is right over 80% of the time. I do not consider this necessarily accurate on a scientific basis, but for this year I think it is accurate.

Now at the start of the month I predicted the markets would be down 10-20% for the year versus year end 2008. I am standing by that but am now thinking it could be a larger decrease. Let's hope not.

You may be reading this and thinking I am just another doom-and-gloomer, but you would be wrong. I have no predisposition. I am, however, not seeing any news that suggests that the worst is behind us. I am solid doom-and-gloom when the data suggests same and right now it is hard to read it otherwise. Some do, but they have been giving some less than credible predictions.

Not a Record, But Three More Banks Down

I have said repeatedly that my prediction of massive bank failures in 2009 was a no brainer, as in it took no crystal ball. Well, that continues to be the case. Another three down Friday.

Second Best to a Record

London luxury homes had their second worst decline in January (I know, who cares). I expect worse ahead. London is following the U.S. in its decline but unfortunately for them I anticipate their problems are significantly worse than ours. We will see, but I would move to Canada before the U.K.

Probably Not So Bad

I noted last Thursday that Goldman Sachs predicted $4 trillion (with a T) in financial institution losses. I did not agree with it - I just reported it. Not good news from Paulson's old firm.

Naked Capitalism makes a good point that this is more negative than Nouriel Roubini, a constant - yet usually accurate of late - doom-and-gloomer. He predicts U.S. financial problems of $1.9 trillion, less than 50% of Goldman. I only hope they are both wrong, yet I fear that Nouriel may still be calling things correctly. If so . . . I have no idea how bad this might get.

Disclosures: None.