Maybe Friday’s 366 point decline on the Dow is History’s way of sending black roses. The market celebrated the 20th anniversary of the 1987 crash rather modestly. In ’87, the Dow lost 22% in one day. Friday, it was just 2.64%.
The Australian market will probably do some correcting of its own today. Since the worst of the credit crunch selling in mid-August, the market has rallied by 18%. Superstar miner BHP is up 45% since mid-August. Rio Tinto is not far behind, with a 35% gain since August 17th.
But what now? Reports on existing and new home sales come out this week from America. They will probably show that the American housing market is in slow-motion freefall, as tighter lending standards and falling house prices—not to mention rising inventories and interest rates—combine to prolong the misery.
The US economy may not be in a textbook recession. But obviously something important is going on. The world’s largest economy is struggling, weighed down by a mountain of debt.
The Daily Reckoning Australia