Monday, August 06, 2007

Just Like Iraq

Notice the way this Reuters article about falling oil prices is framed - "The macro economic picture does not look good" - and contrast that with how many in the business media (especially on CNBC) were framing the economic picture less than a month ago when the Dow hit an all-time high of 14,000:

NEW YORK (Reuters) - Oil prices fell more than 5 percent on Monday, the biggest slide since December 2004, as concern about the U.S. economy rippled through financial and commodity markets.

The losses added to hefty losses Friday following a report showing weaker-than-expected job growth in the United States, the world's biggest oil consumer, and another showing slowing growth in the service sector.

"The macro picture does not look good," said Nauman Barakat, senior vice president at Macquarie Futures USA. "The subprime crisis is also spilling over into the commodities sector, and in particular the energy."


Markets were being hit by the prospect that the borrowing that drives the financial system will either become prohibitively expensive or dry up completely as a result of risk repricing.

This began with difficulties and losses in the U.S. subprime -- or risky -- mortgage business and has spread to other areas. An economic downturn could slow world demand growth for energy.

Just a month ago when the Dow hit 14,000, we heard how the fallout from subprime mortgage problems was "contained," the fundamentals underlying the American economy were good, and GDP growth in the second half of the year was going to be in the 2.5%-3% range.

Now we're hearing how the "macro picture does not look so good."

Quick turnabout.

Kinda like the volatility in the markets. Last Tuesday the Dow fell triple digits. On Wednesday and Thursday, it made triple digit gains. On Friday, the Dow lost 281 points. Today, the Dow is up nearly 200 points in the last hour of trading.

Seems like investors can't figure out if they should be panicking or bargain hunting.

Neither can the shills on CNBC.

On one day (say, last Friday), they were panicking and declaring economic Armageddon.

Then just a few days later, we're hearing how the markets are oversold and investors should wade back in.

Must be hard to keep a straight face while you're waving the economic pom poms over at CNBC and urging people to "buy, buy, buy..."

And yet, they do it.

Sometimes they remind me of Joe Lieberman, Preznut Bush and a few other true believers when they're making the periodic media rounds to say "We're making progress in Iraq..."

UPDATE: Here's an ABC News article that also uses the dreaded "r" word in talking about future economic activity.

Maybe now that conventional wisdom has changed so abruptly, we should forget about it and assume Dow 20,000 is right around the corner?

Maybe so. The Dow is up nearly 266 points right now with just 11 minutes of trading left in the day.

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