Ruminating Out Loud

The drastic losses incurred in the financial markets is one of the prime examples of a major collective human experience during the past year. This particular decline in the stock market value amounting to $7,000,000,000,000, which I would call the big debacle, is discussed in a NY Times article. Excerpt from the article:

…In a mere 12 months, the Dow Jones industrial average plunged 4,488.43 points, or 33.8 percent, its most punishing loss since 1931. Blue chips like Bank of America, Citigroup and Alcoa lost more than 65 percent of their value. The broader Standard & Poor’s 500-stock index sank 39.5 percent, almost exactly matching its decline in 1937.

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — was wiped out in a year of violent market swings.

But what is striking is not just the magnitude of the declines, staggering as they are, but also their breadth. All but two of the 30 Dow industrials, Wal-Mart and McDonald’s, fell by more than 10 percent. Almost no industry was spared as the crisis that first emerged in the subprime mortgage market metastasized and the economy sank into what could be a long recession…

The markets have become incredibly volatile, especially since Lehman Brothers sank into bankruptcy in September. Since then, the S.& P. has moved more than 5 percent in either direction on 18 days. There were only 17 such days in the previous 53 years, according to calculations by Howard Silverblatt, an index analyst at S.& P.”