Seattle Bubble

Since the stock market is all over the news again today, I thought it would be interesting to look at some past stock crashes and see how the current one compares.

In the chart below I have graphed the crashes of 1929, 1973, 1987, and 2001 alongside the current fall, with the peak points aligned near the left. Each crash is scaled on the y-axis to show the percent of the peak Dow Jones price.

Click to enlarge

Yesterday’s close was 380 days after the recent 2007 peak in the Dow. Here is the total drop 380 days after peak for each crash above:

1929: 38.6%
1973: 18.3%
1987: 24.2%
2001: 13.6%
2007: 38.6%

Will the current crash play out over the next two years more like 1987 or 1929?

Update: Updated the chart to reflect today’s close. The Dow has now fallen further in the current crash (40.8%) than it did in the same length of time from the peak in 1929 (39.9%).

Please vote in this poll using the sidebar.

Here’s a brief roundup of a bunch of noteworthy items that have popped into my inbox and RSS feeds in the last day or two.

Aubrey Cohen: Current economic woes more like 1873 than 1929.

“When commentators invoke 1929, I am dubious,” writes Scott Reynolds Nelson, a professor of history at the College of William and Mary. “According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany’s inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now.”

Nelson continues: “In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls ‘the real Great Depression.’ She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years.”

Noted.

Seattle Times: Microsoft hiring plans to face “adjustment” as tech spending slows

Microsoft confirmed Friday it’s re-evaluating its current hiring plans and “will make some adjustments as appropriate.”

Those adjustments are likely to be downward, given Chief Executive Steve Ballmer’s recent comments about Microsoft being affected by the economic slowdown.

Although the company still intends to keep growing, any reductions are unsettling for a region reeling from the fire sale of Washington Mutual, the sale of Safeco, a Boeing strike and a sputtering housing market.

Seattle Times real estate blogger Cindy Zetts shares some recent meandering excerpts from her blog, in which she appears to be trying to spin today’s market positively.

Aubrey Cohen also gives a good outline of what the local foreclosure auction scene looks like today.

That’s the foreclosure auction scene these days: lots of houses for sale, lots of cautious investors and an increasing number of civilians who think it might be a good place to get a home at a bargain price.

And lastly, Mr. Cohen again, who points out in his blog that local real estate broker Coldwell Banker Bain is thumbing their nose at the national Coldwell Banker office, declining to participate in the 10% off “10-Day Sales Event.”

“While I appreciate the effort to ‘make something happen’ relative to the more adversely affected markets in the U.S., we strongly feel the ‘retail’ mindset of this promotion is not appropriate,” Ron Sparks, managing vice president Coldwell Banker Bain, said via e-mail. “Homes are unique, and each brings a nuanced value proposition to the market. We do our very best to properly price our listings every day.”

In other words, “Seattle is special. Homes here are worth whatever we say they’re worth, and these stubborn buyers just need to deal with it.”

It’s official: Congress is not interested in addressing the underlying issues that caused this mess.  Instead, they would rather pour trillions of dollars we don’t have into a doomed attempt to maintain the broken status quo.

I predict we’ll be repeating this whole routine in less than six months with a new bailout, after these hundreds of billions fail to fix anything.

Final vote in the House: 263 Yes - 171 No

Here’s how Washington State’s Representatives voted (district map):

YES:

• District 2 - Rick Larsen (D)
• District 3 - Brian Baird (D)
• District 6 - Norm Dicks (D)
• District 9 - Adam Smith (D)

NO:

• District 1 - Jay Inslee (D)
• District 4 - Doc Hastings (R)
• District 5 - Cathy McMorris Rodgers (R)
• District 7 - Jim McDermott (D) (voted YES first time around)
• District 8 - Dave Reichert (R)

Kudos to Jim McDermott (that’s a phrase I never thought I’d use) for actually switching his vote to the responsible side, and to Jay Inslee and Washington’s Republicans for sticking to their principles.

Curious what kind of pork was added to the bill to sway the votes of (at least) 57 congressmen? The Chicago Tribune has a good rundown here.

Update: It looks like my kudos for McDermott were premature. From the Seattle Times:

Democratic Rep. Jim McDermott said his opposition to the economic bailout proposal Friday was a “protest vote” made with the knowledge the bill would pass the House without his support.
…
“I told the speaker [Nancy Pelosi], certainly, if she needed my vote she could have it, but … I didn’t want to vote for it, and I really lodged a protest vote.”

I suppose I should have guessed.