I just checked on the weekly return series on the SP500 dating back to January 1950, and I found that in the 3,065 weeks in this series, the % change in the S&P 500 during the course of this week (-9.4% from last Friday through today) is the fourth worst on record. The only weeks that were worse during this period were the week of the crash of ’87 (-12.2% net, inclusive of the more than 20% decline on “Black Monday (October 19)), the week leading up to 9/11 (-11.05%), and the first week of April 2000 (-10.54%).
All posts by Jim Garven
The New Financial Ice Age
How’s this for pessimism? According to October 13, 2008 issue of Business Week, we have now officially entered the “New Financial Ice Age”!
Prediction Markets Update (October 2, 2008)
The 2008.PRES.OBAMA Intrade contract now trades at 67.4, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 32.6 (compared with 64.3 and 35 respectively as reported on yesterday’s update), so in terms of the overall contracts, the odds favor Obama by a 2:1 margin.
The state-by-state contracts now imply that Mr. Obama holds a 311-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, Florida (27 Electoral College votes) has moved from Obama’s column back into the “swing” state category, but has been replaced by Nevada (5 Electoral College votes) and Ohio (20 Electoral College votes). Besides Florida, the other “swing” state currently is North Carolina (15 Electoral College votes).
FiveThirtyEight.com currently gives Mr. Obama a 331.2 to 206.8 advantage over Mr. McCain.
Addendum: October 2, 2008 Electoral College Vote allocation
Barack Obama (311): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), Nevada (5), New Hampshire (4), New Jersey (15), New Mexico (5), New York (31), Ohio (20), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Virginia (13), Washington (11), and Wisconsin (10)
John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)
Doom and Gloom
TIME, “Sky High Housing”, 09/12/1977
TIME, “To the Rescue” 11/13/1978
BusinessWeek, “The Death of Equities”, 08/13/1979
TIME, “The Squeeze of ‘79”, 10/22/1979
TIME, “The Computer Moves In”, 01/03/1983
TIME, “That Monster Deficit; America’s Economic Black Hole”, 03/05/1984
TIME, “The Crash”, 11/02/1987
TIME, “Is Government Dead?” 10/23/1989
BusinessWeek, “Is the Party Over?” 04/17/2000
TIME, “Will You Ever Be Able to Retire?” 07/29/2002
Prediction Markets Update (October 1, 2008)
The 2008.PRES.OBAMA Intrade contract now trades at 64.3, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 35 (compared with 64.3 and 35.7 respectively as reported on yesterday’s update).
The state-by-state contracts now imply that Mr. Obama holds a 313-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, has “picked up” Virginia (13 Electoral College votes) and Florida (25 Electoral College votes). The current “swing” states include Nevada (5 Electoral College votes), North Carolina (15 Electoral College votes) and Ohio (20 Electoral College votes), with Nevada and Ohio leaning strongly toward Obama (with prices of 55 and 53.5 respectively).
FiveThirtyEight.com currently gives Mr. Obama a 336 to 202 advantage over Mr. McCain.
Addendum: October 1, 2008 Electoral College Vote allocation
Barack Obama (313): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Florida (27), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), New Hampshire (4)New Jersey (15), New Mexico (5), New York (31), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Virginia (13), Washington (11), and Wisconsin (10)
John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)
Doubling down…
Today, it appears that the U.S. Senate is doubling down on the bill that the U.S. House of Representatives rejected on Monday. I am sure not how effective or meaningful higher FDIC insurance limits are likely to be; the bill calls for, among other things, raising the upper limit from $100,000 to $250,000 on insured deposits. Clearly, such a policy change weakens incentives for consumers to monitor their banks and also makes it incumbent upon banking regulators to monitor more solvency even more closely. By increasing the upper limit on coverage, this is an indirect way to recapitalize banks in the short run (by effectively enabling them to substitute (contingent) government capital for private capital). However, this also carries with it a serious moral hazard by creating incentives for banks to rely less upon private capital in the longer run.
I couldn’t help but notice from the news reports today that one senator apparently managed to slip in a provision in the “bailout” bill for “mental health parity”, whatever that means. I think it has something to do with mandating more “generous” mental health coverage in the private health insurance markets. What this measure has to do with resolving the credit crisis is beyond me. I can’t help but wonder what other completely unrelated earmarks are being inserted as a way to buy votes.
The "Global" Electoral College, compliments of The Economist
The Economist has launched a website called “The Global Electoral College”. How this actually works is described in an article on economist.com entitled “Global Electoral College, Obama or McCain, who do you want?“: “The Economist has redrawn the electoral map to give all 195 of the world’s countries (including the United States) a say in the election’s outcome. As in America, each country has been allocated a minimum of three electoral-college votes with extra votes allocated in proportion to population size. With over 6.5 billion people enfranchised, the result is a much larger electoral college of 9,875 votes. But rally your countrymen—a nation must have at least ten individual votes in order to have its electoral-college votes counted. There are few countries whose votes in the Global Electoral College are a foregone conclusion. So the winner is unlikely to be decided by a small number of “swing countries”. Rather, they will have to cobble together a coalition of small, medium and large nations. (A campaign stop in Beijing is recommended, as well as a tour of Africa.) Voting in the Global Electoral College will close at midnight London time on November 1st, when the candidate with most electoral-college votes will be declared the winner.” What this online poll reveals more than anything else are the political preferences of Economist subscribers from all around the globe. Apparently with that group, McCain isn’t particularly popular, since the latest tally is 8,192 global electoral college votes for Obama, and only 3 for McCain. So far, no Iraqis or Iranians have registered their votes online, so Obama and McCain are tied at 0% in both of these countries. However, Obama has an 83/17 edge right now in Afghanistan, which is pretty close to his 79/21 “lead” in the United States. The only country in the world right now which is pro-McCain is Andorra (62/38 in favor), which is the current source of McCain’s 3 global electoral college votes!]]>
The "Global" Electoral College, compliments of The Economist
The Economist has launched a website called “The Global Electoral College”. How this actually works is described in an article on economist.com entitled “Global Electoral College, Obama or McCain, who do you want?“:
“The Economist has redrawn the electoral map to give all 195 of the world’s countries (including the United States) a say in the election’s outcome. As in America, each country has been allocated a minimum of three electoral-college votes with extra votes allocated in proportion to population size. With over 6.5 billion people enfranchised, the result is a much larger electoral college of 9,875 votes. But rally your countrymen—a nation must have at least ten individual votes in order to have its electoral-college votes counted.
There are few countries whose votes in the Global Electoral College are a foregone conclusion. So the winner is unlikely to be decided by a small number of “swing countries”. Rather, they will have to cobble together a coalition of small, medium and large nations. (A campaign stop in Beijing is recommended, as well as a tour of Africa.) Voting in the Global Electoral College will close at midnight London time on November 1st, when the candidate with most electoral-college votes will be declared the winner.”
What this online poll reveals more than anything else are the political preferences of Economist subscribers from all around the globe. Apparently with that group, McCain isn’t particularly popular, since the latest tally is 8,192 global electoral college votes for Obama, and only 3 for McCain. So far, no Iraqis or Iranians have registered their votes online, so Obama and McCain are tied at 0% in both of these countries. However, Obama has an 83/17 edge right now in Afghanistan, which is pretty close to his 79/21 “lead” in the United States. The only country in the world right now which is pro-McCain is Andorra (62/38 in favor), which is the current source of McCain’s 3 global electoral college votes!
Prediction Markets Update (September 30, 2008)
The 2008.PRES.OBAMA Intrade contract now trades at 64.1, whereas the 2008.PRES.McCAIN Intrade contract is currently trading at 35.7 (compared with 62.1 and 38 respectively as reported on yesterday’s update).
The state-by-state contracts now imply that Mr. Obama holds a 273-185 “lead” over Mr. McCain (based upon my cutoff price point of 55 for allocating Electoral College votes). Since yesterday, Virginia has (just barely) fallen from the Obama column; this is the only change from yesterday. The current “swing” states include Florida (27 Electoral College votes), Nevada (5 Electoral College votes), North Carolina (15 Electoral College votes) and Ohio (20 Electoral College votes), with Virginia, Nevada and Ohio leaning strongly toward Obama (with prices of 54.5, 54.4, and 54 respectively) and Florida and North Carolina nearly tied.
FiveThirtyEight.com currently gives Mr. Obama a 330.6 to 207.4 advantage over Mr. McCain.
Addendum: September 30, 2008 Electoral College Vote allocation
Barack Obama (273): California (55), Colorado (9), Connecticut (7), Delaware (3), District of Columbia (3), Hawaii (4), Illinois (21), Iowa (7), Maine (4), Maryland (10), Massachusetts (12), Michigan (17), Minnesota (10), New Hampshire (4)New Jersey (15), New Mexico (5), New York (31), Oregon (7), Pennsylvania (21), Rhode Island (4), Vermont (3), Washington (11), and Wisconsin (10)
John McCain (185): Alabama (9), Alaska (3), Arizona (10), Arkansas (6), Georgia (15), Idaho (4), Indiana (11), Kansas (6), Kentucky (8), Louisiana (9), Mississippi (6), Missouri (11), Montana (3), Nebraska (5), North Dakota (3), Oklahoma (7), South Carolina (8), South Dakota (3), Tennessee (11), Texas (34), Utah (5), West Virginia (5), and Wyoming (3)
What to Make of the Bailout Plunge
Morningstar’s Pat Dorsey gives his take on the market plunge today, based upon the extreme values being realized these days by the so-called “VIX” index: