As of Sunday night, October 12, all the European and Asian stock markets continue to plunge in a state of panic selling. That will surely follow in the U.S. when our markets open tomorrow morning.

To give some indication of the depth of the crisis, here is a list of year-to-date performances of the major stock index in each country listed. (As an example, in the U.S. it's the New York Stock Exchange index.) The numbers are self-explanatory.

In that the financial crisis began with the failure of U.S. banks and financial institutions, I think it can be seen how much anger and blame will be directed towards America in the coming months and possibly years. There will be many dimensions to this crisis other than the amount of money lost worldwide. The amount of wealth already lost is unimaginable. Not to be alarmist, but I can't see how anyone could conclude that we're not on the precipice of another great depression.

United States, down 38%
Canada, down 41%
Mexico, down 45%
Brazil, down 55%
Argentina, down 42%
Chile, down 41%
Peru, down 52%
Britain, down 47%
Germany, down 49%
France, down 47%
Spain, down 44%
Switzerland, down 35%
Italy, down 51%
Portugal, down 51%
Iceland, down 73%
Ireland, down 61%
Netherlands, down 53%
Belgium, down 52%
Denmark, down 44%
Finland, down 54%
Norway, down 55%
Sweden, down 48%
Greece, down 58%
Austria, down 60%
Poland, down 48%
Russia, down 65%
Hungary, down 54%
Ukraine, down 74%
Lithuania, down 55%
Turkey, down 57%
South Africa, down 48%
Israel, down 30%
Japan, down 39%
Hong Kong, down 47%
China, down 57%
Taiwan, down 40%
South Korea, down 53%
Australia, down 53%
Singapore, down 45%
India, down 58%
Indonesia, down 50%
Malaysia, down 39%
New Zealand, down 46%
Philippines, down 50%
Pakistan, down 49%
Vietnam, down 61%

Very scary stuff, Kahuna. Both the numbers and the observation that the US will be blamed globally for this. I hope you're wrong about how deep it will go.

Do you have any hope that the rescue/bailout/etc measures here or abroad will staunch the bleeding?

Great post but scary Kahuna.
I sincerly believe we have not been informed how bad things are expected to get, in an effort to avoid more widespread panic. I noticed the usual drivel yest about govt saying lets all remain calm and pull together, be patient.
I also noted a headline to the affect that the IMF feels we stand on the precepise of global financial collapse. I noticed very shortly thereafter that the story was gone (yahoo news pages).
I hope we get a miracle, but dishonesty and manipulation contributed to this mess, and I fear we are no where near the bottom. I pray I am wrong.

This week I plan to attend a stockholders' meeting for a giant. A boring but always dependable old giant with a huge global presence. I cannot imagine what this one will be like. But I want to hear what is said there. Or do I? I will report.

Boomer

The G7 and the G20 did about all they could think of over the weekend. Some thought their interventions would stem the panic. Apparently what they agreed on didn't work. I'm not certain, but my guess is that now everyone will simply have to sit back, wring our hands, and let the market run its course and correct itself. Intervention doesn't seem to have worked.

The problem I see with that is that the recovery from the bottom will be very, very slow. Basically, the entire credit market will have to be rebuilt, relationships re-established, central banks tested for the value of their support, relationship of currencies re-established. The effect will be long term damage to every free economy in the world.

I use the adjective "free" because if I haven't forgotten too much economics, the "closed" economies like China will be able to recover much faster than those, like us, that rely on the operation of free markets. China has all the factors of production necessary for an economy to operate except customers with money. They have the labor, raw materials, manufacturing and the national wealth to make it all work. But their economic capacity is much greater than their own people are able to consume. If the recovery develops like I think it might, when consumers in the U.S. finally recover economically enough to ramp up their consumption, only the Chinese will have retained their capacity to manufacture and sell products to us. In time our productive abilities will recover. But in the meantime, China will have grown even stronger.

I'll use the U.S. auto industry as an example. A few months of very low sales will test the ability of our auto companies to survive. At best, they will have to lay off most of their work force. This will ripple thru their supply chain, of course. Demand for Chinese-made cars and trucks will lag as well. But the Chinese, not being driven by the need for profits, can afford to keep their productive capacity in place, even without the throughput of orders. When demand ramps up again, which it surely will in time, the Chinese will be able to react and supply the demand much faster than we will. We will have to recall workers, retrain them, open mothballed plants, re-establish the supply chain, which surely will have been disrupted, and so on. Eventually, we will recover. But in the meantime, the Chinese will have become an even stronger economic force in the world. And it goes without saying that political strength and influence follows economic strength.

In my opinion, this financial crisis will have far deeper and longer term effects than just the loss of money from 401k's and retirement accounts. If my theory is correct--and I certainly hope it is far from accurate--this crisis will cause a long term rebalancing of economic and political power in the world. The countries on the winning end will be the closed or semi-closed economies like China and India. They were headed in that direction anyway, but the damage done by this crisis will elevate those countries to more world prominence and power pretty quickly for the reasons I have theorized above.

Of even greater concern is the increased power that will likely accrue to those countries with an inordinate amount of raw materials compared to tbeir populations. Specifically, I mean the Middle East countries that control a huge porportion of the world's oil. They too will benefit from a rapid economic decline in the economies of the free world. Unfortunately, thier political influence in the world is also likely to increase.

It's been a long, long time since I studied macroeconomic theory. I hope I forgot something and that I'm dead wrong. If there are any other economists out there, tell me I'm all wet. I hope I am.

Kahuna,

I agree it's about more than the stock market. For more than two years, I have been watching and talking about the arms and legs I saw growing from the monstrous practices of the lending industry. All out and around. That was what I could see. I know there was more that I did not know.

Yes, it is about more than the stock market. I know.

And my guess is that A. E. Lafley knows that, too. I want to hear what he has to say tomorrow morning. There will be a question and answer period so he will interact with the stockholders.

Lafley's MBA is from Harvard. But I have read before he decided to do that, he had planned to get a PhD in Medieval and Renaissance history from the University of Virginia. (-- sometimes called "Mr. Jefferson's University" as you may know. I spent a little time there long ago on the National Endowment for the Humanities' dime. I bet they don't have much of a dime anymore, huh. And lately, I find myself thinking about Mr. Jefferson and Co.)

And believe it or not, one time Lafley was asked what he thought of those "golden parachutes." That was several years ago. When I heard him indicate that he was not completely in favor, I honestly thought I did not hear him right. Maybe I did not.

I have heard that Lafley is also known for grabbing what is called "teachable moments." Maybe he can teach me something tomorrow. But I know this is bigger than Lafley. And so does he. I know.

Let's hope Lafley's interest in Medieval history does not become more applicable than his MBA.

So anyway, I am working up the courage to go to hear what Lafley has to say tomorrow. But, then again, I am sitting here writing this while trying to work up the courage to turn on morning television.

Boomer

Originally Posted by Villages Kahuna

The G7 and the G20 did about all they could think of over the weekend. Some thought their interventions would stem the panic. Apparently what they agreed on didn't work. I'm not certain, but my guess is that now everyone will simply have to sit back, wring our hands, and let the market run its course and correct itself. Intervention doesn't seem to have worked.

The problem I see with that is that the recovery from the bottom will be very, very slow. Basically, the entire credit market will have to be rebuilt, relationships re-established, central banks tested for the value of their support, relationship of currencies re-established. The effect will be long term damage to every free economy in the world.

I use the adjective "free" because if I haven't forgotten too much economics, the "closed" economies like China will be able to recover much faster than those, like us, that rely on the operation of free markets. China has all the factors of production necessary for an economy to operate except customers with money. They have the labor, raw materials, manufacturing and the national wealth to make it all work. But their economic capacity is much greater than their own people are able to consume. If the recovery develops like I think it might, when consumers in the U.S. finally recover economically enough to ramp up their consumption, only the Chinese will have retained their capacity to manufacture and sell products to us. In time our productive abilities will recover. But in the meantime, China will have grown even stronger.

I'll use the U.S. auto industry as an example. A few months of very low sales will test the ability of our auto companies to survive. At best, they will have to lay off most of their work force. This will ripple thru their supply chain, of course. Demand for Chinese-made cars and trucks will lag as well. But the Chinese, not being driven by the need for profits, can afford to keep their productive capacity in place, even without the throughput of orders. When demand ramps up again, which it surely will in time, the Chinese will be able to react and supply the demand much faster than we will. We will have to recall workers, retrain them, open mothballed plants, re-establish the supply chain, which surely will have been disrupted, and so on. Eventually, we will recover. But in the meantime, the Chinese will have become an even stronger economic force in the world. And it goes without saying that political strength and influence follows economic strength.

In my opinion, this financial crisis will have far deeper and longer term effects than just the loss of money from 401k's and retirement accounts. If my theory is correct--and I certainly hope it is far from accurate--this crisis will cause a long term rebalancing of economic and political power in the world. The countries on the winning end will be the closed or semi-closed economies like China and India. They were headed in that direction anyway, but the damage done by this crisis will elevate those countries to more world prominence and power pretty quickly for the reasons I have theorized above.

Of even greater concern is the increased power that will likely accrue to those countries with an inordinate amount of raw materials compared to tbeir populations. Specifically, I mean the Middle East countries that control a huge porportion of the world's oil. They too will benefit from a rapid economic decline in the economies of the free world. Unfortunately, thier political influence in the world is also likely to increase.

It's been a long, long time since I studied macroeconomic theory. I hope I forgot something and that I'm dead wrong. If there are any other economists out there, tell me I'm all wet. I hope I am.

Just before I got on TOTV this afternoon the DOW was up over 500 points! I am a believer of Milton Friedmans ideas on free market capitalism. The market will always self correct. We may not like the time frame in which it happens, but it will happen, as today's numbers show.

Will it go down after today? I'm sure of that! But the fact that it took today's upward swing shows, that we are probably at or near the worst of the bottom.

I believe that most of our market problems are because what I see in these posts, a fear which is not reality based. The basics on which we invest are still strong, P/E ratios, capitalization, segment strength of the business. Our own fear has driven the market lower than it should be based on real numbers. Lets have a POSITIVE attitude, and less fear talk and we'll progress in this market faster.

A 'honeymoon rally' has occurred today in the stock market but it may not be prudent to identify a bottom or a trend. We will have to see if these damn bankers (VK excluded due to retirement) will actually stop their 'credit strike.' If bankers will adopt the altruistic attitude of the governments and actually support the commercial and private paper market, we could see 'some' of the scare gone and a chance to right some wrongs. If they chose to just self-protect, we could have a deepened crisis. Stay tuned ...........