Dear Friends:Our actions of today are led by our anticipations about tomorrow. Stated in another way, thinking about the future shapes the present moment. If we anticipate peace and prosperity, we conduct ourselves in one way -- if we perceive a bleak future of war and economic collapse, we act accordingly. This recurring theme of the self-fulfilling prophesy in human affairs is fascinating as well as frightening. Masterful leaders and statesmen have learned to harness the powerful nature of this phenomenon in order to triumph in elections, to get legislation passed, to initiate social transformation and religious movements, and, of course, to start wars.
This phenomenon is culturally and technologically engrained into the capital markets, where traders, anticipating a price increase (for example, the price per barrel of crude oil), actually bid up the price by their pre-emptive action; or where the public, anticipating the precipitous financial decline of a company or industry, stop investing in the company or industry's securities, and stop buying its products and services as well. In theory, a good rumor, spread rapidly and across a large segment of the population, can be turned into fact. Our perceptions become our reality. The fans of theosophy and esoteric studies believe that this is an outgrowth of or a corollary to The Law Of Attraction. They may well be right.
A recent article from THE NEW YORK TIMES follows, by way of example:
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Markets Dive in Last Hour, Carving New Lows
By JACK HEALY
Published: November 19, 2008
Wall Street doubled down on its losses on Thursday, just a day after financial markets closed at their lowest point in nearly six years.
By JACK HEALY
Published: November 19, 2008
Wall Street doubled down on its losses on Thursday, just a day after financial markets closed at their lowest point in nearly six years.
In a day dominated by fear and uncertainty, financial markets plunged in late trading, carving new lows, after spending much of the day bobbing between positive and negative territory. The Dow Jones industrial average was 444.99 points or 5.5 percent lower Thursday afternoon at the close. The wider Standard & Poor’s 500-stock index was down 54.14 points or 6.7 percent, adding to its losses after tumbling 6 percent on Wednesday. The Nasdaq fell 5 percent.
As stocks hopped from red to green and back again, investors continued to seek cover in safe havens like Treasury notes and gold, driving those prices higher. And a new report that jobless claims had crested to their highest levels in 16 years reminded investors that the frail economy continues to weaken.
“We think it’s going to continue to go lower,” said Ryan Detrick of Schaeffer’s Investment Research. “We don’t think people are scared enough. They’re just not showing enough fear. People are numb to this, they’re almost immune to it.”
On Thursday, the Labor Department reported that new claims for unemployment benefits rose to a seasonally adjusted 542,000 last week, the highest level since July 1992. On Capitol Hill, the Senate was expected to take up a bill extending unemployment assistance to people whose benefits have expired.
Economists said the swelling jobless numbers were creating a vicious circle between Wall Street’s losses and the afflictions of the broader economy.
“The profit drag on corporate America is widening and deepening, and this is leading to more layoffs and cutbacks in capital spending, which is extending and deepening the recession,” said Stuart Schweitzer, global markets strategist for J.P. Morgan Private Bank. “We’ve gotten into a full-blown, self-feeding downturn.”
Financial shares, which took the brunt of Wednesday’s losses, continued their bad streak on Thursday. Citigroup fell by double digits for a second day, to less than $5 a share, despite news that Prince al-Walid bin Talal of Saudi Arabia was increasing his stake in the troubled banking giant to 5 percent. Banks from Wells Fargo to Bank of America to JPMorgan Chase were all down in afternoon trading.
Shares in America’s two largest automakers were mixed after Congressional leaders said any proposal to bail out the auto industry would fail if it were put to a vote this week. Democratic leaders from the House and Senate criticized the executives of Ford, Chrysler and General Motors, and said the automakers needed to make a more persuasive case that they would be responsible stewards of $25 billion in federal aid. Shares of G.M. were up slightly while Ford was lower.
Investors sold off early Wednesday after confronting data that showed an unexpectedly large drop in consumer prices, which suggested deflation could become the newest problem for policy makers. The Dow fell more than 5 percent Wednesday while the Nasdaq fell more than 6 percent.
“The problem is there is absolutely no silver lining visible,” said Arjuna Mahendran, head of Asian investment strategy at HSBC Private Bank in Singapore. “The financial crisis may now be at its tail end and we are now in a second phase where corporate distress is the key issue. A third phase may come early next year, when emerging markets will really struggle as the crisis widens and exports continue to shrink.”
Oil prices slipped below $50 a barrel, settling at $49.62 a barrel, down 7 percent.
In Europe, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, closed down 3 percent, while the FTSE 100 index in London was down 3.2 percent. The CAC 40 in Paris declined 3.4 percent, and the DAX in Frankfurt 3 percent. In Moscow, the Micex exchange halted trading for one hour after shares fell 7.6 percent.
In Europe, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, closed down 3 percent, while the FTSE 100 index in London was down 3.2 percent. The CAC 40 in Paris declined 3.4 percent, and the DAX in Frankfurt 3 percent. In Moscow, the Micex exchange halted trading for one hour after shares fell 7.6 percent.
Credit markets remained tight. The so-called Ted spread, the gap between yields on safe three-month United States government securities and the rate that banks charge one another for loans of the same duration, was unchanged at 2.11 percentage points. The spread is well down from its peak of 4.6 points on Oct. 10, but the improvement in the credit markets has stalled over the last two weeks. Analysts consider a level of 0.5 point to 1.0 point to be normal.
Asian markets stumbled badly. The Tokyo benchmark Nikkei 225 stock average finished 6.9 percent lower, taking its loss to the year to nearly 50 percent. Government data Thursday showed Japanese exports were down 7.7 percent in October from a year earlier, the steepest decline since December 2001. The drop contributed to Japan’s $665.8 million trade deficit.
While a drop had been expected — overseas consumers have long been cutting down on spending, and the yen’s strength against other currencies makes Japanese goods more expensive overseas — the amount of the decline does not bode well for the wider economy.
The Hang Seng in Hong Kong closed down 5.2 percent, and the Shanghai Stock Exchange composite index fell 1.7 percent.
Asian markets stumbled badly. The Tokyo benchmark Nikkei 225 stock average finished 6.9 percent lower, taking its loss to the year to nearly 50 percent. Government data Thursday showed Japanese exports were down 7.7 percent in October from a year earlier, the steepest decline since December 2001. The drop contributed to Japan’s $665.8 million trade deficit.
While a drop had been expected — overseas consumers have long been cutting down on spending, and the yen’s strength against other currencies makes Japanese goods more expensive overseas — the amount of the decline does not bode well for the wider economy.
The Hang Seng in Hong Kong closed down 5.2 percent, and the Shanghai Stock Exchange composite index fell 1.7 percent.
In Sydney, the S&P/ASX in Sydney dropped 4.2 percent. The index was dragged down by the giant mining companies BHP Billiton, which fell 9.1 percent, and Rio Tinto, which plunged 13.1 percent. Like other raw materials companies, they have been affected by worries that the global downturn will damp demand.
On Wednesday, the German chemical conglomerate BASF said it would cut global production by as much as 25 percent because demand from automakers, textile companies and the construction industry dried up.
Bettina Wassener and David Jolly contributed reporting.
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####
It is important to know that the recent events in the economy do not reflect a sudden downturn at all -- these inefficiencies, abuses and areas of neglect have been going on for years -- it is simply that the news of these problems has come to light. This bad news (i.e., a poor economic report card) initiated the negative response which we see reflected in the economy.
Think about this: A bank will keep on loaning your company money until it hears that you might not continue to be creditworthy (even if this last is merely an ill-intended rumor leaked by some naysayer or detractor) -- then, it will take anticipatory action and stop making further loans. In fact, it might even declare all of your outstanding loans immediately due, creating an immediate crisis in your company.
A rumor can cause a run on the banks. A rumor can cause the destruction of virtually anything Human-made. Propaganda and news control are powerful weapons. And we base our present reality upon a supposed future. Dreams, either good or bad, might well come true, depending upon whether or not we act on them.
Philosophically (or perhaps metaphysically), there is no present: there is only the past and the anticipated future, which makes the present inconsequential.
The next time that a well-intended friend admonishes you for your depression or malaise and reminds you to "live in the present," simply tell him or her that preparing for the future has stolen your present from you.
Oh...and about the economy -- it will magically rebound as soon as people begin to believe that it has hit bottom and that it is ready to rebound.
Faithfully,
Douglas Castle
p.s. Please take a moment and view my new blog at http://aboutdouglascastle.blogspot.com/. Let me know your thoughts!
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