October 2008, the nightmare month that will live on in many memories has now officially ended. Finally. To say October was an eventful month for the financial markets and the world economy is right up there with asking Mrs. Lincoln: “Well, aside from that little unpleasantness, how did you enjoy the play?”
The financial events of October 2008 have thrown economics textbooks out the window. Utter devastation has tested the patience and souls of everybody from the wage earner who is afraid to open his or her 401k statements, which are piling up like newspapers while on vacation, to the true titans of Capitalism like Maurice R. "Hank" Greenberg, former Chief Honcho of AIG, who saw his 15.8 billion dollars worth of AIG stock melt down like so many lumps of sugar left out in the rain over the gut-wrenching span of one single, horrific week.
Aaron Smith’s column for CNN Money (October 28), quoted the S&P’s Economic Guru: “October is always the scariest month of the year. . . It’s when most of the stock market crashes and the bottoms occurred. So it’s living up to its reputation. It’s going to be a really bad October." We could quibble whether October 2008 should be ranked the “worst ever” or only in the top five, “worst ever” category. “Bespoke Investment Group’s” website (quoted in “The Big Picture” website at the end of the month), rated October 2008 the 4th worst ever: “It is worth noting that dating back to 1920, there are only 4 comparable months. . . . September 1931 was down 29.94%, October 1987 was down 21.76%, May 1940 was down 23.95% and March 1938 was down 25.04% which would mean that right now, October 2008 is the single worst month in history."
CBS News’ website on November 1 called October 2008 the “worst month in 21 years,” saved from being even worse by back-to-back gains right at the end. They went on to report that the “Dow Jones industrials . . . ended the month down 14.1 percent, while the broader Standard & Poor’s 500 index lost 16.9 percent during October.”
It could have been worse. A volcano could have sprouted up through the intersection of the 405 and the 10 freeways, one of the busiest in the world. Aliens from other galaxies could have landed and decided that the human race would make good pets. The “Big One” could have released all that pent-up tension along the San Andreas Fault bisecting California and all hell could have broken loose. Ebola virus could have escaped containment in those hi-tech labs and devastated a city. The dreaded nuclear disaster, think Three Mile Island, could have occurred, invoking the China Syndrome and wiping out major urban areas Chernobyl-style. Los Angeles could have finally gotten that NFL franchise, thus blacking out goodly parts of the NFL football television schedule for some 7 million viewers. Farm animals could have sprouted wings and flown across major cities.
Would that this were the end of it – that the media would not again utter another single word in November or December about the ‘looming global economic devastation,’ or for all of 2009, giving us a much-needed break in the action to catch our breaths, finally open those 401k envelopes, and get back to planning exactly how many more years we would have to work full-time to be able to afford to retire. But, that’s not going to happen. We have to get used to gloom and doom economic reporting; it’s going to be around for a while.
It’s time to give our loved ones a big hug and roll up our collective sleeves and even count our blessings. Social scientists are having a field day right now studying how our spending patterns and lifestyles are changing right before our eyes. Our seemingly insatiable desire to consume may actually have started cooling off, according to the latest data. It’s a great time to buy or lease a new car, if you have the credit. My wife was even recently contacted by a major lender wanting to increase our home equity line – this at a time when credit markets are supposed to be ‘frozen.’ They are now officially bidding against themselves, lowering their rates again and again and really bidding for the business – I suppose that they have lend money to somebody out there. When the representative of the lender asked my wife what she planned to do with the extra money, she said: ‘You solicited me; what difference does it make?”
Welcome to November. Welcome to the new era of ‘less is more.’