How does the stock market disaster compare with past panics? Here’s a look

By Bernhard Zand

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For many who work and invest in the house emporium, the accomplished brace months have been an unmitigated, once-in-a-lifetime mishap. You only have once chance to prevent for retirement, so a 40% small quantity in your stock portfolio feels analogous the end of the world.

You start to question all the advice that you’ve been given. With major indexes commercial at the same levels as in 1998, persons who have been equity fans deviate to wonder whether it’s really true that, into the bargain the long term, stocks tend to outperform other investments (BusinessWeek, Oct. 30, 2008). Ask economic historians as being their have existence read on the situation, and, not surprisingly, they grasp the longer view. They dress in’t say, "Don’t worry about it. It’s no big deal."

Many financial experts think the rub has scrambled our assumptions about the risks and returns of investing in stocks. But experts do know this is hardly the first—nor will it have existence the last—time that the terraqueous globe’s investors have been seized with imaginary and hit with deep losses.

Another Dark October

For investors wondering what the future holds, the key question may be whether this crisis is just another (very bombastic) bump along a road to prosperity, or whether the pecuniary markets have driven off the course into a ditch.

So how villanous is the current farrago? It’s virtue crunching some numbers:

In October 2008, the spacious Standard & Poor’s 500-stock index fell 16.8%, following a 9.2% drop in September. The Dow Jones industrial average dropped 14.1% in October, following a 6% decline in September.

Other Months Were Worse

Through the in the first place 10 months of the year, the S&P 500 has lost 34% and the Dow shed 29.7%. From their all-time high points—on Oct. 9, 2007—the Dow is down 34.2% and the S&P 500 has lost 38.1%. (Those are a great deal of better than the losses of about 45% that the indexes had registered at their lowest levels this fall.)

How does this compare to history? For the Dow, the percentage losses of October 2008 are exceeded by 15 other months since 1928, including September 1931, when the Dow plunged 30.7%. Other rough months, according to the Stock Trader’session Almanac, were in 1929, 1930, 1931, 1932, 1933, 1938, 1940, 1987, and 1998.

If the S&P 500 finishes 2008 at this level, its 34% yearly report decline would be the third worst since 1930, beaten on the outside by 1931 and 1937. However, if stocks recover a bit, 1974’s 29.7% drop for the S&P 500 and 2002’s 23.4% fall in the index might be worse.

Rules Haven’t Been Rewritten

For Richard Sylla of New York University’sitting Stern School of Business, this year’sitting crisis is united of a long line of rough periods for equity investors. "It’s a bear place of traffic like a number of bear markets," he says. It’s not as if the fundamental rules of investing have been rewritten, he says. "The stock market hasn’t changed its stripes."

For current investors redemptory for retirement or other indispensably, a big worry is that the stock market is a big hoax that has collapsed. Stocks got opportunity to pass overpriced, this theory says, and investors might never get back those losses. A prime example is the bubble in technology stocks in the early 2000s, whereas the tech-heavy Nasdaq composite hit a high of 5,132.52 in March 2000.

With the Nasdaq now commercial at 1,720, it could be a lifetime or two before it approaches its heights during the bubble.

Reacting to Banking Bad News

Eugene White, a pecuniary historian at Rutgers University, doesn’cheek by dint of. jowl think this is a similar situation. "What’s happening at this moment is the stock market is reacting to the bad news in the banking sector and to the arrangement as a whole," White says, not an overvaluation of stocks themselves. While neither White nor Sylla knows when stocks will recover, White insists "fundamentals look considerably good," especially the U.S. dispensation’s competency to improve its own productivity over time.

A new deposit finds that this pillar of Republican support has shifted somewhat toward Obama. McCain is fighting to win it back

By Moira Herbst

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The pounding of the U.S. economy and stock markets seems to have shaken the support of key "investor class" voters for the Republican Presidential nominee, Arizona Senator John McCain.

In a nationwide telephone poll of 1,208 people taken from Oct. 26-30 by Reuters/C-SPAN/Zogby, McCain edged the Democratic nominee, Illinois Senator Barack Obama, among those who identified themselves as "investors" by 50.4% to 43.8%, with 5.8% "not sure." That was down violently from a 15-point induce for McCain in a similar poll taken a month earlier. (Among non-investors, Obama led 56% to 36.1% in the most latter survey.)

"[The data] underscores more than anything else how much the financial crisis hurt McCain," says John Zogby, founder of the Utica (N.Y.)-based polling firm Zogby International. "In response to the emergency, McCain was erratic, infuriate, and misspoken."

A Building Block for Bush

The good recent accounts for McCain? He seems to have recovered a bit since the darkest days of the financial crisis. A poll taken on Oct. 21, while stocks were at their in the greatest degree volatile, had him tied with Obama among investors.

Clearly, the investor class—which many pollsters define as those who have more than $5,000 invested in the stock market—is critical to a McCain victory. About 35% of voters belong to that assemblage, and it was a key building block of George W. Bush’s two victories, especially in 2004, when Bush won the support of investors by a wide margin excessively Democrat John Kerry. "If McCain doesn’t win it—and win it big—he loses the election," says Zogby.

Candidates upon the body both the Republican and Democrat sides aimed their pitches at this group early on, whether it was McCain’s vow to maintain the Bush requisition cuts or Senator Hillary Clinton (D-N.Y.) and Obama’s promise to restraint capital-gains tax increases. In February, BusinessWeek revisited some of the investor-class voters (BusinessWeek, 2/14/08) we profiled in September 2004. We found they had done for one’sitting interest in the intervening years but were just beginning to feel the pinch of the downturn in home prices and economic growth.

No Great Faith in Either Candidate

McCain’s recent recuperation may reflect his pounding at Obama over charge plans. He altered his task plan on Oct. 31, saying for the elementary time that he would like to slash capital-gains taxes in half on a permanent groundwork, and not even-handed in opposition to the next two years, as he’d previously promised.

Pat Consolmagno, one 87-year-old retiree in Englewood, Fla., seems typical of those investors who are sticking with McCain. She voted for Bush in 2004 and is adamantly backing the Republican candidate this period. Consolmagno and her 90-year-old husband, Joe, live off the roughly $80,000 they get from earnings on their interchangeable funds and savings, Social Security, and a Chrysler pension. She says their investments "are not virtue what they were." But she doesn’t believe the financial meltdown is the fault of single in kind political party, and doesn’confidentially give credit to Obama to disentangle the problems.

"Obama? I don’t think he’s got a clue," she says. "I don’t think either [aspirant] is a genius when it comes to the markets; we’re just sitting here waiting to see the sort of happens."

Skepticism of Republicans

McCain seemed to have a strong hold forward investors’ loyalty early in the drop, as he promoted his "maverick" image and tried to distance himself from Bush. But after the implosion of AIG (AIG) and Lehman Brothers, and the ensuing debate about a Wall Street bailout, McCain’s prevail on began to shrink.

Investors in general have been greater degree of skeptical of the Republican Party (BusinessWeek, 4/24/06) inasmuch as 2006. At that time, investors polled by the agency of Zogby expressed uneasiness through President Bush’s handling of Hurricane Katrina, the Iraq war, and the shortage.. While Bush received the votes of 61% of investors in 2004, he had slid to a 43% job-approval rating by 2006, according to Zogby.

"The Republican Party fire-brand has clearly been bruise," says Dan Clifton, a Washington-based analyst with Strategas Research Partners, a New York investment research firm. Clifton points out that considered in the state of the pecuniary crisis win in earnest at the end of September, McCain’s casualty began to change.

"Obama stood up with American flags and housekeeping advisers saying, ‘I know you are hurting. Help is on the way,’" says Clifton. "He offered solace and guidance space of time McCain offered annihilation."

The U.S. financial rub is a symptom, not a cause, of global problems. The U.S. must solve its trade deficit and invest its credit wisely

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Photo Illustration: David Sleight/BW; Image: Simon Maina/AFP/Getty Images

By Michael Mandel

When the third district gross domestic product report came out on Oct. 30, most of the attention focused on the distil in real consumer expenditure, the first since 1991. Especially in a Presidential election year, the pain for consumers (BusinessWeek.com, 10/29/08) is the most relevant political fact.

But to know whither this strait is headed above the top the next year or so, you need to watch a different number: the size of the U.S. trade deficit. In the third billet, the U.S. had a trade shortage. of $707 billion—equal to 5% of GDP at some annual rate. That’s smaller than the pinnacle deficit of nearly $800 billion in the third part quarter of 2006, but it’sitting still an astonishing sum, especially since every dollar of the trade deficit is another dollar that the rest of the world has to lend the U.S.

Homeowners are staggering under giant mortgages, Wall Street is flat on its back, and the country is in the throes of the greatest credit crunch since the Great Depression—yet America keeps borrowing by the truckload. If this strait was caused by too much debt, how long can the trade deficit stay so high?

In fact, there are three possible scenarios because of the trade deficit, each of which implies a different set of consequences for the U.S. arrangement and instead of the global economy:

•Business considered in the state of regular One chance is that the trade deficit scraps high. The rest of the world keeps shipping goods and services to the U.S. while it continues to furnish the U.S. the riches to pay for the imports.

•Global restructuring Alternatively, the trade deficit shrinks because U.S. consumers cut hinder part on imports and the tranquillity of the world has to put to a global economy that lacks the U.S.’s customary demand and borrowing.

•Innovative growth The final possibility is that the dealing deficit shrinks because the U.S. exports more innovative goods and services to the rest of the world.

Before going end the pluses, minuses, and likelihood of each scenario, impediment’s take a quick step back and influence by looks at the big paint. The global boom of the past 10 years has been driven by three flows. First, multinational companies shipped technological knowledge and business know-how to countries such as China, India, and elsewhere in public tranquillity to set up supply chains there. This "ebon matter" is not picked up anywhere on the economic facts, further it was absolutely highly rectified for juicing up global growth. In go as antidote to this flow of knowledge, the industrialized world—and especially the U.S.—got back a river of paltry goods and services. Finally, to pay for these imports, the U.S. borrowed a steady stream of riches from the rest of the world—roughly $5 trillion worth since 2000.

But here’s the doubt no one really worried about: How did this circulating medium beget into the country? The treaty sway borrowed about $1.5 trillion directly from overseas. But most of the borrowing—perhaps $3.5 trillion to $4 trillion worth—flowed from one side Wall Street in the form of corporate bonds, equities, and exotic securities. Wall Street firms were the greater intermediary between the rest of the world and U.S. consumers. For instance, firms would package subprime mortgages into a complex security and then sell big chunks to overseas buyers.

This run of currency, an essential division of the global boom, explains why Wall Street was so prosperous in recent years—and why it failed to such a degree suddenly. Bankers, hedge fund managers, and other Wall Street types would delight their piece of the foreign money as it came into the U.S. They grew rich that way. But when it became clear that U.S. consumers could no longer afford to carry the loans, the pecuniary flows froze up, threatening the global boom.

Thus, the financial crisis is a symptom, not a cause. At root, this is a crisis of the entire global economy as it has developed in addition the past 10 years.

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NEW YORK — Paula Radcliffe of Britain glanced through her shoulder to see the emulation lined up in single file behind her.

The world-record holder was so dominant in gusty conditions at the ING New York City Marathon that she served in the dual roles of superior and windbreaker and still breezed to a comfortable conquest Sunday, her abet consecutive flourish and third overall.

Radcliffe didn’t need a dramatic finish, as in her previous couple victories — that was saved on account of the men’sitting race, in which Marilson Gomes dos Santos of Brazil blew past Abderrahim Goumri of Morocco by encircling a mile to spree.

Radcliffe, 34, led stingily the entire way, as none of her rivals seemed to want to brave the elements.

“It was like, ‘Come on, we’ve got the whole road,’ ” she said with a laugh.

On a cool, sunny promised time, 38,377 runners started the race. Radcliffe finished in 2 hours, 23 minutes, 56 seconds. Ludmila Petrova, 40, of Russia was second in 2:25:43, eight years after she won the race.

Kara Goucher of Portland took third in 2:25:53, making her the first American to reach the podium since Anne Marie Letko was third in 1994.

Gomes, also the 2006 winner, triumphed in 2:08:43. Goumri’s time was 2:09:07. He was runner-up for the second consecutive year.

Jeremiah Mushen of Seattle was 137th overall and 51st among U.S. men in 2:40:24.

Danelle Sullivan of Seattle was 50th among U.S. women, and Alyson Littman of Seattle was 56th among U.S. women.

Notes

• Radcliffe has won eight of the 10 marathons she has started — all but her brace Olympics, at the time that she was thwarted by health problems.

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Memo To My Bosses:

Don’t get me wrong. I be fond of my piece of work. Sportswriting has been very, highly good to me.

So I don’t want this to sound like sour grapes, or the rant of a bitter man.

I like my work. I not ever wake up feeling as allowing that I gain to go to work. I want to go to work.

But please, I’m begging you guys — don’t ever execute this to me once more.

USC 56, Washington 0 on Saturday.

Philadelphia 26, Seattle 7 on Sunday.

I’ll cover anything you ask. I’ll go on anywhere I’m assigned, but-end please, a weekend this bad has to be a once-in-a-career punishment.

I love my job, boundary I hated this weekend.

Football’s a astonishing game, but this dubious doubleheader was a incubus.

This felt more like a period than an assignment. More like a punishment than a privilege.

Were you watching Cirque du Seahawks on Sunday?

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BAGHDAD — Iraq expects a U.S. response to requested changes in a select security pact readily after this week’s U.S. presidential discrimination, an aide to the prime minister said Sunday.

Another Iraqi official said the U.S. indicated it would accept all the proposed changes except one — greater Iraqi legal control over U.S. soldiers and contractors.

Yassin Majeed before-mentioned the U.S. response would come afterward Tuesday’s vote so the president-elect — either Barack Obama or John McCain — could be briefed on the Iraqi proposals, which were submitted by Iraq’session Cabinet last week.

Iraqi lawmakers say the changes are essential to win parliamentary approval for the mete out, which would keep U.S. troops in Iraq until 2012 and give the Iraqis a greater role in the conduct of U.S. military operations.

Without an agreement or a new U.N. mandate, the U.S. military would have to suspend its mission, and the U.S. warlike’s that will be in Iraq would be up to the man who takes office in January.

McCain supported the 2003 inroad of Iraq and the troop surge; Obama antagonistic the infringement and uttered negotiations without ceasing a security agreement should be conducted as part of a “broader commitment” to begin withdrawing the body of troops.

Obama’s campaign Web seat says the Democratic aspirant believes the agreement also should be approved by Congress.

Among other things, the Iraqis are now asking for a ban on using their district to attack neighboring countries, elimination of language that might allow the U.S. to stay hither past 2011 and changes in a clause providing limited Iraqi jurisdiction over U.S. troops.

The current draft provides for limited Iraqi jurisdiction for major crimes committed off post and off what one ought to do.

The Iraqis want a joint U.S.-Iraqi committee to decide whether accused soldiers were away duty or forward authorized missions.

Awakening salaries

to be divide