Massive Market Volatility is not a Good Thing! Biggest Percent Gains and Losses Occur in Economic Crisis.

I am amazed at how many people think that suddenly with a 10 percent gain on Monday that somehow the market is now in good shape.  This could not be further from the truth.  Massive percentage swings occur during economic turbulent times.  You do not want to see 10 percent up or 10 percent down days.  What you do want to see is a market that is steadily moving up based on earnings reports and an economy that is growing at a healthy pace.

During this week, the market had the worst consumer confidence report ever.  The rating came out at 38 when the market was expecting 52 which was already a horrible number.  The fact of the matter is the middle class American is getting hosed from every front as if Wall Street was using multiple fire hydrants to pump and drain their problems onto the taxpayer.  This bailout of the financial culprits who caused this mess now looks to have a provision of allocating a large number of the fund to compensating executives.  Compensating executives?  They should get zero compensation and we should actually be putting criminal provisions.  To allocate compensation is an utter joke in the face of the economic pain being faced by the majority of the country.

For those that think economic market volatility is good let us look at some historical numbers for the Dow:

Dow jones biggest gains

Out of the top 10 daily percentage gains in history, 7 occurred during the Great Depression, 1 during the 1987 market meltdown, and 2 during our current crisis.  In fact, out of the top 20 daily percentage gains in history 17 occurred during the Great Depression.  Remind us again how massive upswings are good again?  They are not.  They signify fear and massive movements in and out of the market.  The average investor doesn’t even stand a chance at the moment.  Even with these massive up swings, where does the Dow stand from the peak reached last October?

dow.jpg

Even after the historical upswing, the Dow is still down a stunning 36 percent in one-year.  Keep in mind this is also factoring in that only a few weeks ago A.I.G. was removed from the index of 30 stocks and replaced with Kraft.  What a convenient time.  If A.I.G. were still in the mix, it would be lower.  So now we’ve seen the top up days.  What about the Dow’s worst days ever?

Dow jones biggest percent drops

Out of the top 20 daily percentage down days, 9 occurred during the Great Depression, 2 occurred during the 1987 crash, 1 in 1997, 1 after 9/11, 1 in 1899, 1 during the 1907 panic, 1 during 1917, and 3 in our current crisis!  Think about that, over 100 years of history and the only time in history that had more volatility was during the Great Depression.

You also have to keep in mind that the market crash hit in October of 1929 but the bottom was not reached until 1932.  If we once again look at a 5 year chart of the Dow, it looks like the bottom fell out in September of 2008:

Dow 5 year

So even though a 10+ percent jump in one day may feel like an injection of cocaine and provide immediate relief, the longer term consequences are much more dire.  You do not want the economy operating like a maniac going all over the map.  Employment is rotten, earnings are in the dumps, state budgets look like a house party the morning after, and employers are still cutting jobs.  Oh, and our Fed just slashed rates again throwing the U.S. Dollar under the bus once again to appease his central bank masters.  Oil shot up in tandem.  These are the guys that are supposedly protecting us?  Time to get these folks out of political power.

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13 Comments on this post

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  1. HopeSeekr said:

    The bankers aren’t elected. In fact, they largely dictate state policy. Greenspan served across 4 presidents, we’re crying out loud.

    October 30th, 2008 at 8:02 am
  2. chris said:

    I’m confused. How do I vote the FED and his “central bank masters” out of office?

    October 30th, 2008 at 9:49 am
  3. Brad said:

    Thank you for finally writing this! I have been telling people for months now that these huge swings in the DOW are a bad thing! Thank you!

    October 30th, 2008 at 9:55 am
  4. lifeguard1999 said:

    Every time (except one) that the Dow has gained more than 5% in a day, it has subsequently ended up lower. The only time it did not was during the Great Depression (April 19, 1933).

    October 30th, 2008 at 10:09 am
  5. mybudget360 said:

    Simple. New government. Given the current circumstances the FED has done things outside of its mandate. We can go outside our mandate and kick these folks out. And do you really think anyone has been following the book over these past years? Time for new government.

    October 30th, 2008 at 12:33 pm
  6. AC said:

    This is much like what happened during the dot.com crash. Up, Down, Up, Down – it happens until people get accustomed to it – and then, at some point, it doesn’t go Up again. Things are poised to get much, much worse.

    October 30th, 2008 at 2:41 pm
  7. Tim Jowers said:

    You cannot vote the FED out of office. Our government is a puppet government. The FED represents its 19 member banks. Even its website says its “quasi-public”: I think that’s a euphemism for “we pretend to be public”. Between the FED, FDIC, and Treasury Department, the transfer of welath happening in Congress is nothing!
    “Let me issue and control a nation’s money and I care not who writes the laws.”
    – Mayer Bauer (later named himself “Rothschild”)

    October 31st, 2008 at 6:40 am
  8. Didier said:

    I wonder how much this bear rally “cost” for the many investors. If the downfall would be steady, everybody would loose money, but if the markets is fluctuating like this, you can loose even more.

    October 31st, 2008 at 8:52 am
  9. rweyrick said:

    Remember your pledge (the pledge of allegiance) lets dump democracy and restore the republic. The american people deserve no less.

    November 27th, 2008 at 7:00 am
  10. Surviving A Recession said:

    It always amazes me how people believe that economic booms will never end.

    Great articles. i cannot believe that anyone could think that market volatility is a good thing. i wish people would stop looking at the stock market, the DOW in particular, as an indicator of whether or not the economy is recovering.

    Drops or rises in the Dow are the worst indicator of how the “real” economy is doing. I am not saying that there are not some bell weather qualities to the DOW. What i am saying is that it should not be focused on as much as it is.

    February 24th, 2009 at 1:27 pm
  11. iToldUso said:

    Here’s what’s even more amazing about all this. Day after day, year after year we as Americans see this going on. What do we do? Nothing. Some may say writing about it or becoming “informed” is how we are fixing it. The reality is that this country didn’t earn it’s freedom by writing about it or making everyone “informed”. The freedom was fought for with blood. Keep that in mind if you want to really see some change. Because it’s nice to be informed but, what gets real results? Talking about it? NO. Actually marching into ALL the politicians offices (look closely if you ever do and you’ll see things in their you don’t even want to know how much they cost) and throwing them out PHYSICALLY? YES. Wake up America it’s time to take the country back by force.

    July 26th, 2009 at 8:32 am
  12. Stock Market Trading said:

    I like the way you said it and I totally agree with you. The 10% jump is really not a good sign. What we need is a stable market and not a see-saw performance.

    August 27th, 2009 at 2:01 am
  13. CLARENCE SWINNEY said:

    People do not know. Sad. Tsunami and Volcanic Eruption will hit them in the butt.

    Great Middle Class Years-1945-1980–Each percentile increased almost evenly(percent) in Income and Wealth.

    1981-Reagan began big huge Redistribution and 1% took off for outer space, NYT wrote–Rich do not recognize new Rich.

    1945-Top 1% owned 30% Total Financial Wealth
    1980–1%-20%
    1989–1%-36% (80% Increase )
    2007–1%-43%

    2007-
    1%=43%
    10%=70%
    20%=93%
    80%=7%(120 million)

    How High Can They Go?

    20 years 3 Presidents did it

    They got 99,000 Net New Jobs Per Month to Carter-Clinton 222,000 in i2 years.

    The people do not know will you please inform them.

    A vote for a Republican in Washington is a Vote against Middle Class And For Wealth Class.

    clarence swinney–old ugly mean
    Author-Forthcoming book–How Democrats created a Great Middle Class and Republicans are determined to destroy it. Facts.

    Democrats have the FACTS of history on their side.
    Most things that made America great were from Democrats. Facts.

    Forthcoming DVD from fund raising presentations
    Democrats Hootenanny- facts-fun- humor- praise-Heaven for Democrats and Hell for Republicans.

    Any die hard Democrat who wants to present it live in your state and make a few bucks contact cswinney2@triad.rr.com

    April 23rd, 2010 at 6:44 am

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