Welcome To Wherever You Are (Part II)

Norcross Oct 2nd, 2008General Ramblings

Now back to the market itself*. There are many, many issues at hand, and they’re all inter-related. The ‘biggest single point drop ever’ that happened on Monday was actually the 17% largest in history. To match the drop in 1987, it would have to have been 3x larger. And the Dow itself isn’t the best indicator of the US market. It’s only 30 companies, and it’s price-weighted, so a dollar gain in a lower priced company (which would be a larger percentage) would be negated by a dollar drop in a higher priced company. So while it’s a widely accepted barometer of the US stock market, it’s not the end-all answer to what’s going on. Look at the S&P 500, or the Wiltshire 5000 to get a better perspective. And while you’re at it, include the 10 year bond yield, the FTSE (London exchange) and the MSCI EAFE (a broad European and Asian index) for good measure. And let’s not forget the CDS (Credit Default Swap) market, which is a $46 trillion (with a T) dollar unregulated market (in contrast, the NYSE is $25 trillion). In other words, market analysis is a full time job, not reading a headline. ]]>

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