Been So Low
Posted on November 20, 2008 Posted by John Scalzi 47 Comments
To give some perspective on where the markets are at the moment, the last time the Dow Jones Industrial Index S&P 500 was at this level, Athena was a gamete (two, actually). I clicked over late in the day to see where the stocks were, saw they were down 400 points, and actually yelled “Oh, come on,” at the computer screen. I mean, Christ. How many 400-point-drop days does the Dow have left in it at this point?
(Yes, yes. 18. I have a calculator too, you know.)
As I’ve noted before, we’re relatively well-insulated from the bad news going down at the moment, thanks to combination of limited stock exposure, low debt and significant savings. But it doesn’t mean I don’t worry. You don’t have to have the wolf at your own door to worry about the sudden increase in wolves stalking about. It’s not just the markets, of course. It’s everything else as well. And of course, it’s not as if all of this doesn’t have an effect on my own industry; if you want see what intellectual panic looks like these days, go to a bar near a publishing house. Gruesome.
I think I’ll skip watching the stock market tomorrow.
In some ways, this is a good thing. Stocks have been way overvalued for quite a long time. But for speculators, oil would never have sold for $147 a barrel. It was really worth only $60 a barrel at the time, but because some fucktards wanted to play, it went there. Stocks are now priced to more accurately reflect what a business is worth.
This summer, when the Joker lit that fifty-foot tower of cash on fire, it wasn’t just a statement. No. It was a prophecy. Because when the market drops another 2000 points or so, and companies start collapsing like dead trees, all the Jokers among us are going to come out to watch the world burn.
Ooh!!! Tomorrow is a BUY!
This economic crisis is going to just as bad as Y2K. Just you all wait and see…
Gene is right – companies were horribly overvalued, and ideas about sustainable growth were inflated too.
ah man, my interent-fu is going back to mid 90’s too…read twice, post once!
It is terrifying out here in the real world. Where are we all supposed to work while the money dries up? Guess I’ll be living in my car once construction stops. I can’t sleep much these days. It is horrific.
Meh. It would all be very scary if I had any money to lose ;-)
I wonder how much of this consumer spending drop is related to the fear generated through the news that so many voraciously ascrabe to as opposed to the actual condition of individual families?
I am in a fairly stable economic position, but out of caution for the market, I have recently begun socking away 20% as compared to my usual 10 or even 5%.
I don’t realy have the numbers to prove one thing or another, but I wonder. . .
Wow, I need to edit my posts for spelling before I actually submit. Apologies.
If it helps you feel any better, I asked people to buy me your books for Midwinter Consumer Gift Exchange Holiday ™.
‘Cause I’m too cheap and broke to buy ’em myself.
Perhaps it has a negative effect on your industry on the economic side, but I am sure it has a positive effect on the creative side! What better time than this to be a writer?! Always more fun when the shit is sinking.
My mortgage would beg to differ with you, Brian P.
That is the economic side!
http://www.laht.com/article.asp?ArticleId=320562&CategoryId=14095
SEVILLE, SPAIN — Peruvian novelist Mario Vargas Llosa considers “great traumas” like the current financial crisis “very stimulating” for literature, and therefore predicts the beginning of a “good period” for literary creativity.
That opinion was expressed by the author of “La Ciudad y los Perros” (The Time of the Hero) while talking to reporters in the southern town of Osuna, in Seville province, where the prolific writer spoke both about literature and about current political and economic affairs.
Besides considering the financial crisis stimulating for literature, the writer said that it was “just beginning” and believed that it will change the world completely, because “we’ve never seen anything like it.”
Vargas Llosa, winner of the Prince of Asturias Prize for Literature and the Cervantes Prize, sees himself today in full creative mode, and said that if one believes he has already done his best work he descends into “decadence,” so the healthiest attitude is to keep believing that “the best is yet to come.”
…….
http://www.laht.com/article.asp?ArticleId=320562&CategoryId=14095
SEVILLE, SPAIN — Peruvian novelist Mario Vargas Llosa considers “great traumas” like the current financial crisis “very stimulating” for literature, and therefore predicts the beginning of a “good period” for literary creativity.
That opinion was expressed by the author of “La Ciudad y los Perros” (The Time of the Hero) while talking to reporters in the southern town of Osuna, in Seville province, where the prolific writer spoke both about literature and about current political and economic affairs.
Besides considering the financial crisis stimulating for literature, the writer said that it was “just beginning” and believed that it will change the world completely, because “we’ve never seen anything like it.”
Vargas Llosa, winner of the Prince of Asturias Prize for Literature and the Cervantes Prize, sees himself today in full creative mode, and said that if one believes he has already done his best work he descends into “decadence,” so the healthiest attitude is to keep believing that “the best is yet to come.”
…….
Brian P. is right! When you have to write twice as many novels to pay your mortgage, you’ll find yourself being MUCH more creative.
Perhaps you should start a sideline writing bad pornography. I hear that’s profitable…
dude, mother’s cookies just filed for bankruptcy. My life is so over…
*sniff*
goodbye delicious animal cookies dipped in pink wax and crunchies.
*sob*
I’ve been watching stocks on the Aussie bourse closely, and there are several companies in the ASX200 which have a PE of 4 or less and a fully franked divided of 12-15% They’ve confirmed their earnings, too. And yet the price of stocks & resources keep falling, and people keep pointing to 1987 and 1929.
(My day job involves writing & supporting stock charting/scanning software, so market-watching kind of goes with the territory.)
The big difference between now and the 30’s & 80’s, at least here in Australia, is that the government introduced compulsory superannuation a decade or two back, paid by the employer, which has to go into a recognised super fund in the employee’s name.
Initially I think it was 3 or 4% of gross salary, paid on top, but it’s now 9% or more. All that cash keeps flowing into super companies, and they have to put it somewhere to earn more cash. As interest rates fall the share market becomes more and more attractive.
On a related note, I saw a report saying the market has priced in a worldwide depression for the next 4-6 years. When you compare the flow of information in the modern world vs, say, the 1930’s, I just can’t see it myself. India and China are going to industrialise no matter what, and each has around 4x the population of the US.
speaking of writing bad porn, this will cheer you up if you haven’t seen it.
http://www.spike.com/video/pg-porn-pg-porn/3041858
It is technically completely safe for work, but does have a risque topic.
“I think I’ll skip watching the stock market tomorrow.”
Nah. Tomorrow’s the day to watch it. Something like 9 times out of 10, big falls are followed by reasonably large rises. Prediction for tomorrow: market will open lower than close today, perhaps drop a little more over the first hour of trading, but will then rally, and finish maybe 100 points up.
Why? Because lots of people have seen it drop and realised the price is now too low, and therefore it’ll go up tomorrow.
Simon @19:
“I’ve been watching stocks on the Aussie bourse closely, and there are several companies in the ASX200 which have a PE of 4 or less and a fully franked divided of 12-15% They’ve confirmed their earnings, too. And yet the price of stocks & resources keep falling, and people keep pointing to 1987 and 1929.”
Yeah. I reckon we only have another 6 months to go until _everything_ will be undervalued. Things will start to get interesting when people start realising that! :)
“(My day job involves writing & supporting stock charting/scanning software, so market-watching kind of goes with the territory.)”
Oh, hey, didn’t recognise you! Was just evaluating FCharts a couple of weeks back. Not quite the program I was looking for, but nice work nonetheless.
“I saw a report saying the market has priced in a worldwide depression for the next 4-6 years. When you compare the flow of information in the modern world vs, say, the 1930’s, I just can’t see it myself. India and China are going to industrialise no matter what, and each has around 4x the population of the US.”
IIRC, the definition of recession for what is classed as a developing country is different to what the rest of us have; for them, a reduction in growth rate is all that is necessary for it to be considered one, I believe. So, for a global recession, there’s a minimum growth rate, not an actual shrinkage of GDP is required.
According to this article, the figure is a growth of 3%: if the world hits that, the IMF considers it to be a global recession. So, sure, China and India can continue growing a bit, but if the rest of us are in real recessions, that’s a global one.
The market will begin a respectable bear rally in the next week or two; the selling pressure is beginning to wear out based on the volume figures. (I’ve been holding NDX 1100 puts and Citi 20 puts for 3 months, which may grant a modicum of credibility.) However, this rally won’t last more than 4-6 weeks before the next slump begins. So, you might like to take the opportunity to get out if you are still in.
John and anyone else who wants to get a better handle on things are welcome to take part in our group study on America’s Great Depression, which illustrates how the actions being taken by the Bush administration are quite similar to those taken by the Hoover adminstration. Unfortunately, Paul Krugman and others are advising Obama to follow the direction taken by FDR, which exacerbated the situation. About 150 people of varying degrees of economic knowledge are taking part; one participant has commented that in the present environment, it’s like having the whole world as a Powerpoint presentation.
In summary, increased federal spending + low interest rates + state and local tax hikes = 4-6 years of severe contraction followed by 8-12 years of gradually getting back to where we were. If the contraction is as bad as 1929-1933, GDP per capita will fall from 45k to 24k. However, since the 2008 expansionary peak was bigger and more widespread than the 1929 peak, the contraction will probably be worse which would indicate 15k per capita.
Therefore, it’s wise to figure out how to get by on half your present income and take a second job as employment insurance.
” if you want see what intellectual panic looks like these days, go to a bar near a publishing house. Gruesome.”
erm. Why? We’re all going to get hurt but (and please correct me if I am wrong) I was under the impression that recessions (barring the last one) are generally good for the entertainment industry and for sellers of cheap booze (probably drugs too) as people will pay for escapism so long as it is relatively cheap and makes them feel better for a bit. Someone said to me the relentless cheerfulness of Disney was due to the the severity of US Depression (don’t know if they’re right, but it makes sense of a sort). Yes, the bottom/middle tier of authors will inevitably suffer, rather like farmers – their crop is needed, but they always get shafted to keep the middlemen in business. But the publishers – provided they actually um, you know, think, and provide what the public want in these sort of times should be better off than the rest of us, along with bar-owners.
Someone said to me the relentless cheerfulness of Disney was due to the the severity of US Depression
Not sure of that. Steamboat Willie, the first Disney short, came out in 1928. The first feature length movie, Snow White, was released in 1937. I didn’t find it particularly cheerful, what with evil stepmoms trying to kill a chick.
Borders is on the verge of bankruptcy, and Random House just froze all their existing pensions and deleted pensions altogether for new employees to save money.
Gun and alcohol sales are up, though:)
It is the duty of the historian to gaze into the abyss; then you go out for a stiff drink!
More seriously, I’m a federal employee but my old man has a pension from Ford; I’m sweating that one.
@Karissa – Well… it’s still a pretty ‘new’ recession. The initial reaction is to stop all spending (worst time to have a book come out) but that has to change. New fridges and Lattes don’t come back in a hurry but I’d guess – speaking for myself here, that a few hours happiness with say Terry Pratchett were going to be very tempting:-). Borders is the legacy of a number of years of problems – not going in healthy and suddenly affected by downturn. Random house well I dunno. But someone said Harlequin were having their first ‘up’ quarter for a long time. :-) I don’t pretend to know anything anything without fins and not a lot about those either. Didn’t know about the guns…
I just repeat this mantra to myself…
“1907, 1929, 1938, 1946, 1979, 1987, 2001, 2008… Still breathing.”
Thankfully, I’m 42, so I actually felt kinda stupid for not jumping into the market when this began to tank. Sooner or later (Looking more like later these days), all those cheap shares in my 401k are going to add up.
Assuming my fund managers didn’t bet big on GM.
Dave Freer:
In a micro sense a downturn might be good for authors because books are cheap entertainment, which makes them attractive for people who want to be amused but don’t want to spend lots of money.
But in a macro sense the downturn is bad for authors because book publishers are now generally divisions of much larger, generally publicly-held corporations, who are exposed to the economic downturn on several fronts, and are currently being battered by credit and liquidity issues.
This means publishers buying fewer books from authors — particularly new authors without track records — and trimming down their staffs under direction from above. Right now is not a brilliant time to try to be a debut author, and not such a great time to be an author with marginal sales.
Time for me to open my Roth IRA, the college student thinks to herself.
I just got a payroll statement indicating that, yes, I will make enough to fund a Roth IRA through Vanguard this year, and that makes me very happy.
Also, the market dropping *significantly* below 8000 was to be my go-time if I did have enough money available.
Think I’ll hold off ’til Tuesday, though, just to see what happens.
Also, thanks for “Right now is not a brilliant time to try to be a debut author.” Now I will focus more on *writing* as opposed to (worrying about) *selling* my writing.
John Scalzi: I agree with what you’re saying about new/marginal authors. That’s what I said :-) (and I probably fit there). And of course you are right about there being few independent publishers — but I think you are taking a very short term outlook here — those large corporates are going to be aggressively cutting staff… in loss-making/ low earning parts of the organisation (yes some will throw the baby out with the bathwater). In the last while publishing probably fitted that profile, but I think that may change as this wears on. Given that we’re both right about the ‘micro sense’ part – it is cheap entertainment and unlike the latte you can enjoy it several times, it is actually possible that if the recession lasts, publishing (and brewing) ought to better than other sectors. Of course the big headache is financing -particularly for advances for those big sellers. The logical answer might be to cut a different type of deal, cutting advances and increasing royalties (and there has been some talk of this.) Naturally suspicious me, I prefer the publisher to put up the biggest advance possible – that way they share the risks and have a good reason to want to recover as much of it as much as possible. Still, I wouldn’t be surprised to see moves in that direction.
Harlequin has branched out into ebooks, and cataloged their backlist into ebook format. With Amazon heavily marketing their Kindle, and other companies (eBookwise, Sony) in the mix, ebooks has become a multi-billion dollar industry. They’re cheap to produce- no printing or warehousing costs- and easy to get.
Publishing houses that are exclusively print format are losing money, epublishers are making it. Maybe this time of depressed economy will force a paradigm shift in the publishing industry.
Dave Freer:
Agreed that the current downturn does (potentially) offer opportunities for publishers in the long run. Doesn’t make going for drinks with people in publishing any more cheerful at the moment, however.
But in a macro sense the downturn is bad for authors because book publishers are now generally divisions of much larger, generally publicly-held corporations, who are exposed to the economic downturn on several fronts, and are currently being battered by credit and liquidity issues.
^This.
One of those fronts is, of course, what bookstores are going through. I work in publishing. My company’s having a pretty darned good year, but we are very aware that our customers, the booksellers, are hurting – they’re tightening inventory, making returns earlier than usual, and wondering what holiday sales will bring.
We might fall in love with a debut author, or have a favorite established midlist author, but when book buyers are being cautious, it’s harder to get them to take a risk on a new name when they know that shelf-space dedicated to Big Author X will sell.
That’s not to say there isn’t any hope. Sleepers happen. Surprise bestsellers happen. Or sometimes, people in the publishing house love a book so much – from the editors to the marketing department to the sales reps – that their excitement catches. Booksellers hear the in-house buzz and want to read ARCs. They get them, love them, and talk up the book to customers well before it’s published. By the time the pub date rolls around, everyone wants to read it.
It can happen, but I very much agree with our host – it’s tough to be a debut/midlist author right now, when everyone’s eyeing the future and wondering what’s to come.
Deflationary recession bad for stockholders, good for cashholders. Those with low debt and good cash savings are in good shape. Those with high debt and no savings get whacked.
They said I was crazy when I paid off my house as quickly as possible. Why, I could be borrowing against the equity! Living the high life At LOW LOW RATES!!!
Heh. No mortgage payment. Priceless.
I’m wondering if the government shouldn’t have kept that little 700 billion bailout plan a secret. Seems to me that a little knowledge is dangerous and all that did was confirm to everyone with money tied up in stocks that, yes indeed, the economy was going down the toilet. Panic set in. Everyone started pulling their money out of stocks. At that point it didn’t/doesn’t matter how much money you throw at the problem – despite the reassurances people don’t believe that their investments are safe and are going to pull out of whatever they can. I think there are many more declines ahead of us and all we should do is wait for it to hit bottom before we start throwing more good money after bad.
But hey, at least gas is cheaper. (If only I had a job to pay for that gas!)
Anyone know some good books to read about the psychology of the economic downswing we are seeing? It seems like fear, rather than fundamental shifts in economic processes, are driving a lot of this.
Todd, It’s not related to the economy at all, but if you haven’t read Malcolm Gladwell’s “The Tipping Point” – that’s an interesting foray into group psychology/dynamics.
And, or course, the market felt a little more bubbly today. Four- and five-hundred-point swings, up or down, are not the real problem (although they wear on the nerves). It’s the self-fulfilling expectation of more declines to come. Assuming no systemic meltdown (a big assumption, but whaddya gonna do?) a recovery is expected in two to four quarters, and the market will reflect that expectation somewhat earlier. Obama & Co. can help matters by saying all the right things, and delivering a shot of money to the economy’s backside at regular intervals until then.
And, no, I didn’t mean to imply that the new administration will be delivering a shot of penicillin to clear up the legacy of this administration’s excesses, but maybe I should have.
I wrote:
“Prediction for tomorrow: market will open lower than close today, perhaps drop a little more over the first hour of trading, but will then rally, and finish maybe 100 points up.”
Hmm. Rally was a little later than I predicted. And somewhat stronger. I really wasn’t expecting 500 points up, even after 2 days in a row of 400 down.
Todd Stull @37: Unfortunately, that kind of thing is mostly considered to be on the fringe of real science (economists, apparently, are mostly of the opinion that psychological factors have no real impact on pricing — see the “efficient market hypothesis”), so much of the writing on the subject swings wildly from totally logical in one paragraph to out-and-out wacko in the next.
Personally, I believe that psychology is a key factor in what drives market prices, and I find some of the stuff the Elliot Wave crowd say interesting, although I have to dismiss a lot of it as junk, too. With that in mind, Robert Prechter wrote a few books back around 2000/2001 when he started forecasting a big downturn about the kinds of psychology that would dominate. They make interesting reading, although you have to understand and constantly remind yourself that it’s all hypothesis without real science behind it.
Anyone know some good books to read about the psychology of the economic downswing we are seeing? It seems like fear, rather than fundamental shifts in economic processes, are driving a lot of this.
Go straight for the classics, Todd.
Funny how it’s been in such a steady decline since the beginning of the month. Almost as if the investors don’t actually believe Obama’s going to use the Ring to bring peace and prosperity.
Well, actually, since Obama’s been having daily press conferences on the economy, the market’s been up each day, by an average of couple hundred points each day. So that would seem to deflate your argument quite a bit, I’d say.
On November 4 the Dow was above 9500, and was showing signs of a recovery from the mortage collapse (thanks, Barney!). Once the election returns came in, it plunged 20 percent over two weeks. The Dow still hasn’t recovered its pre-election value. You may believe the One has the power to raise stock prices merely by holding press conferences; the facts suggest otherwise.
Well, no. Point in fact, since Obama’s press conferences, specifically about the economy and introducing his economic team, the markets have been up, and if you check with people who follow the markets, they will tell you that much of it has to do with who he is naming and the actions he is taking and sharing in his press conferences. Whereas prior to his discussing his team and his plans, the markets were tanking, for reasons that had very little to do with the election.
In short, you’re assessing blame where it is not due, and neglecting to provide credit when it is. I understand it might pain you that “The One,” as you so derisively call him, might have a beneficial effect on the markets through his choices (and his press conferences to discuss them), but just because you would rather not acknowledge it doesn’t mean it’s not happening.
Incidentally, the markets are up today by over a hundred, the fifth day of market increases.