How we got here, and where we're going.
I'm not a residential financial expert, though I did some daytrading earlier in the decade. This diary is just that: A diary, chock full of my impressions.
This chart* of the Nasdaq composite begins in 2001, when Bush's economy was beginning to lag. You can clearly see the drop on 9/11, and the bounce recovery from it. And then onward the chart slumps through 2002. The US invasion of Iraq began in April of 2003 - when the market's 4 month high broke and began the rally which lasted until this year. The day I remember in particular was April 9, 2003, the day the statue of Saddam was toppled.
Here is a log file from the #Daytraders chat room. It pretty well describes the sentiment. Most prescient are the sarcastic neocon remarks about it all being staged by the CIA with imported antiwar demonstrators. Also notable is the sentiment that this was a decisive turning point and would hasten the end of the war. I've also made sure to include the rumors about Syria, Russia and Saddam even though none of those rumors were true - it shows how our State Department was posturing. No need to read carefully, it's just a mood snapshot:
Log file opened at: 4/9/03 9:05:05 AM
TopTickSlo: why mkt pop?
TopTickSlo: somehting going on
CarpeDiem: yeah, tanks roll into baghdad...
locust: so much for the handwringers and the quagmire, wrong again
Jimmy_No-N: all those that said US not wanted in Iraq gotta wipe the egg off their faces
Whistler: switch on your tv
locust: all fake staged by the CIA right ?
athens: prolly photos live of civilians attacking statue of SAddam almost like a liberation day on TV
Whistler: stratfor reports: 1153 GMT - A source belonging to what MSNBC is calling the Iraqi Republican Party claims that Saddam Hussein and his son Odai are seriously injured, and that Qusai Hussein has been killed. The same source said the president and his surviving son were in Mosul, seeking a path to Syria.
frito: no way they gonna let that guy tear that down till more people show up
traduer: wow how did they import that antiwar demonstrator lol
locust: Democrats predicated their power play on US failure payback will be harsh
toddyG3: holy smoke...forget trading...live human exuberance on TV
toddyG3: those guys wanted to tear statue with bare hands earlier
locust: they managed to tear the plaque off barehanded
toddyG3: events are unrehearsed...unfolding so fast
toddyG3: CBS MarketWatch
toddyG3: Futures reverse course; stocks look higher
toddyG3: NEW YORK (CBS.MW) -- Stock futures perked up Wednesday morning as new pictures of U.S. troops in the center of Baghdad provided a positive catalyst even though investors remain guarded as earnings season heats up.
toddyG3: Though stocks are still trading on war headlines, Wall Street is paying closer attention to the state of post war economy and the quality of corporate earnings, especially following the recent spate of profit warnings.
toddyG3: smart of US troops not to get involve...action right in front of journalists hotel
Geronimooo: 5 million people in bagdad - only 100 on the streets
foo: es pop on pulling statue down?
toddyG3: baghdad gonna be like that tomorrow
oze: ...brilliant PR by letting the people topple statue viewed worldwide !
^Sam: this thing of coming here cheering and showing joy of this war is disgusting, 1000's of ppl died and 100's deing on the steps of hospitals with no body to care.
McD5: let's get Peter Arnetts version of how the war is going
traduer: sam it is better this thing ends sooner than later
traduer: most people here are not celebrating victory from the standpoint of conquest just that it is going faster than thought and can be over sooner
foo: cheney speaking on msnbc
nbates: wow, what caused that pop?
Prince: Saddam in Russian embassy, repaorted by Al Jerrazza
DoubleDown: Russia harboring Saddam
billk: 10:23 ET Pentagon: no truth to al-Jazeera report that Saddam took refuge in embassy - CNBC
DoubleDown: DJ US Sources Think Saddam Was In Bombed Building -Officials
TopTickSlo: every freaking war nuance worth +/- 10 ES
superstock: when was the last time you saw a bull market ? lol
MrMagoo: mkts back to normal confusion
Soothsayer: WASHINGTON, 9 April 2003 ˜ Conservatives within the Bush administration would like to see a change of government in Syria but want it to happen through peaceful means rather than US military action, according to current and former senior US officials
cornflake: timber!
TopTickSlo: ok, people in that crowd INSANE
DoubleDown: Saddam bow down
AkePer: wow look at those people throwing stuff at him
superstock: go mkt go
We all know now that the toppling of the Saddam statue was an astroturf demonstration of the highest order, a propaganda move paid for from the pallets of cash the CIA sent over. It's my impression that this was designed not only to sway popular opinion of the war in Iraq, but also to break through the resistance in the markets and cause a sustained, if albeit artificial, rally.
I remember how incredulous I felt as the market went higher than it had in months. No underlying market data supported this, not unemployment or cap utilization or anything else. And it's been that way for 5 years. In my gut I've always felt that this was Bush's solution to a failing economy -- get the stock market to rally, people will feel more wealthy and loosen up on their spending; maybe even the real estate market could boom.
Bush created an artificial economy, built from equity and credit. As fake as the spontaneous demonstration timed to coincide with the opening bell of the New York Stock Exchange..
Now, to get back to current events, this downward column of O's hasn't begun to touch the base where our artificial rally began 5 years ago. And the pessimist in me, who was bearish then, is bearish still. Meaning I expect us to fall further from that level.
But barring a complete, depression-style meltdown, I am inclined to think this can be turned around. As John McCain would say, 'The fundamentals of our economy are strong.' People have to eat. Most people's jobs are indispensable in keeping the country running. So long as that infrastructure remains intact, the DOW ought to stay above 7,000.
*This is a Point & Figure (P&F) chart. See how it's a grid of boxes. As the stock price moves, the boxes get filled in. Notice that it alternates columns, X's and O's. An X marks the times when the price is rising, and when the price reverses enough, the column changes to a descending line of O's. The numbers 1-9 and letters A, B, C, in the columns indicate the months of the year. So even though it's a timeline across the bottom, it's not linear. You can see with this chart that in 2003, after a couple short columns of X's (January) and O's (February), the chart went up for the remainder of the year (March through January 04). So 2003 is just three columns wide. This type of charting reduces the "noise" and distills the big picture.