On Thursday September 12 2008, just days before the September 15, 2008 Lehman collapse, the Dow Jones Industrial Average closed at 11,421. More than two weeks later on September 30, the Dow closed at 10,850; a drop of only 571 points.

But we all know that the 571 point drop was only the beginning!

Did we have some hefty down days in the two weeks following the Lehman collapse? Indeed, but half the trading days in the two weeks after Lehman, the Dow ended up by an average of 287 points per up day. Here is the breakdown:

Up 142 Points September 16

Up 410 points September 18

Up 369 Points September 19

Up 197 Points on September 25

Up 121 Points on September 26

Up 485 Points on September 30.

With the stocks markets crashing all over the place, some wonder how low it will go.

Few can predict now which numbers specifically the markets will reach, but I think that alot investors, mainly amateurs, will run now from the markets, thus pushing down the markets to even steeper lows.

A big percent investors were on edge since the rally began, wondering daily if today is the one that the floor will collapse and take along everyone. Now that the floor breach already took place in the second half of January and more so yesterday, people – fearing this day for months – are running mad, causing more damage on their way-out as it is evident from the recent steep market declines.

*

Follow or just check-out my Twitter account @yossigestetner to get insights on Political and Economic activity.

Are you buying Gold these days? I mean really, can you go by listening to a talk show host, flipping an advertisement magazine, or have a talk with friends without the Gold issue (and the need to buy it) being mentioned?

Considering that the US dollar is plunging, I think Gold is indeed a valued commodity, but if you don’t have money, i.e. U.S. dollars to cover your weekly and monthly bills, why would you stash up on Gold? To be protected for doomsday? You don’t have money as is, so why does it make a difference to you if the dollar slides even more and Gold rises to $1,400 an ounce? Furthermore, Gold is an investment, so as long you don’t have money to buy stocks, or whatever thing you dream of investing, you should not be carried away by the talk of GOLD. It is just not made for you. End of discussion.

My point here is, that if you are a poor man out there with no extra money, the Gold Rush is not cut out for you, regardless in what context it is: If you look at it as a safety reserve for a doomed era, you will be better off stacking up on food, drinks and medications, or perhaps going on with life as is and wait for Pelosi to help you. If you look at Gold as a rising investment, you had and still have a better chance of doubling and tripling your money faster by jumping into a few good stocks available on Wall St, rather than buying Gold.

All in all I am saying, If you are an average earner, do yourself a favor and let the Gold rise or fall without your participation, just as the price of AIG shares went this year from $22 to $9, before rising again to above $37 a piece without your participation. Ouch, I just killed you: The AIG stock doubled and quadrupled at a time when Gold didn’t even do half as good.

I will not delve into endless statistics or explanations why I believe it is working. I will just point to one thing, and you decide if you agree.

The only thing, besides the stock market, that saw strong improvements in the past half year, is the housing industry. No, not the full real estate market got better, but only the housing industry has now better days. Their improvements (through constant positive statistics) are actually fueling partially the market rally, and are expected to play a major role in a better economic growth (GDP) report due out tomorrow.

Credited by every objective economist for this housing improvement, are two things. 1) Cheap home prices. 2) The $8,000 tax credit for first time homebuyers that was placed into the Stimulus Bill after requested so by Republicans. This gives for Conservatives and Republicans two major points, economically and politically.

Economically: we see once again that tax cuts work, and work very well. In fact, from the whole stupid stimulus package, it appears that the homebuyer’s tax cuts are the only thing that had swift and strong positive results, thus helping to heal the economy in general.

Politically: I think the Republicans need to get/take credit for this considering that it was their idea, and they need to point out that they wanted an even more robust and wide-ranging homebuyers tax credit plan than what the Dems actually agreed to place into the stimulus.

Everyone in politics knows the phrase that was coined in ‘992 by James Carvil, the political mastermind of then-Arkansas Governor and presidential candidates Bill Clinton: “It’s the Economy, Stupid.” This meant to say to voters, ‘don’t get distracted by other issues. The economy is the problem now, so vote in Clinton for President.’

This phrase 17 years later is still relevant from a political and economic perspective, becouse when debating these days Reaganomics, the Left points to the weakened economy of under Bush the First, and when debating “political strategies” some point to that “”masterful” phrase which “propelled Clinton into the White House.” Both, however, are the longest-standing economic and political myths that I have ever seen.

Consider some facts:

A)  In March of ‘991, the U.S. economy was officially out of recession. In English it means, that nineteen months before Clinton won the election, the economy (GDP) was actually growing again, following a very short and light recession.

B)  You can claim that the GDP growth at the time didn’t translate into prosperity to people. Well, first, at least the economy was growing; it wasn’t in a recession as some try to believe until today. Secondly, the Dow Jones Industrial Average, which in the current Stimulus Economy is a gage for success or failure, grew from a recession low of 2,398 in the week of October ‘990, to a high of 3,398 in the week of June first 1992. (The Dow didn’t have a disasters fallback as we had starting last year September, so it was not shooting radically upwards like we experience in recent months, nut it had a healthy growth).

C)  Seeing that the GDP and the Dow are not friendly to this “economy stupid” myth, you will turn to jobs. “Jobs growth is what counts in a REAL recovery.” Fine, let’s count jobs: In the last six months of Bush’s ‘992, the economy gained on a monthly average 129,000 jobs, and in the first half of ‘993, the monthly average was 208,000. Considering that jobs are a “lagging indicator,” meaning they lag the rest of the economy, it is fair to say that the healthy job growth (plus the declining Unemployment Rate) of the second half of ‘992 and the robust job growth of early ‘993, reflected a turned-around, BOOMING economy that started months before Team Clinton had its election night plans ready. While I am at it, get this: the last six months of Clinton’s ’00, the economy gained a poor monthly average of 100K, and the following half year the economy lost 73,000 jobs on a monthly basis, which confirms again that GW Bush inherited a recession, whereas Bill Clinton inherited a booming economy.

D)  Politically speaking, Bill Clinton won a poor 43% of the popular vote in ‘992, one of the weakest showings for an outside candidate, yet he still won the election, due to a third party candidate – Ross Perot running to the Right of Bush – picking up 18% of the popular vote, leaving Bush with just 37% of the vote. In other words, Carvil’s phrase resonated with only a small portion of the population, as we see that Clinton got  only 43% of the vote, of which a big chunk were African Americans who regularly vote 9-10 for Presidential Democrats, regardless the state of general affairs.

Obama, his supporters and the media are excited that the Dow Jones Industrial Average reached today 10,000. It means that the thirty stocks in the Dow index climbed a lot since the Dow’s 6,500 low back in March.

This is funny, because I remember that just a year ago people on the Left were excited with the Dow’s fall because the “rich” on Wall St, “the wealthy,” were losing money. So… why are they now excited with the Dow’s 10,000? Furthermore, in late ’03, under President Bush, the Dow in a period of just a few months reclaimed 10,000 of its 7,600 low. I do not remember the left calling that a “recovering” economy, and in November ’06 when the Dow was at 12,000, the Left didn’t call it a “good” economy either. In fact, some until today believe that the Dems regained control of congress in November of 2006, in part, due to the “weak” economy.

So again I ask: Why does the left care that the Dow is at 10,000?