Here is the performance of the Dow Jones Industrial Average from January 20, 2001 through this week:


Note that as Bush took office in 2001, the tech bubble was already bursting. Although 9/11 resulted in a sharp, short-term drop, the overall decline from the tech bubble bursting could be seen as bottoming out in September, 2002 when the average went as low as 7500. There was a trend upward just after 9/11 when military action was taken in Afghanistan.

The real trend back up in the market began in March, 2003, as the US invaded Iraq. The old saw "war is good for business" holds sway yet again. Note the steady increase in shares traded (the bottom bar graph), beginning as the market began to level a bit in the middle of 2005. Then, as the market peaked last summer, there is a very serious jump in shares traded as the current decline began. Although the losses in the past week are steep, they appear to me to fit in the overall trend of the "correction" that began last summer.

Not that I’m paranoid or anything, but I think a pretty strong argument could be made that the "big boys" in the market decided last summer that the candy store was closing and it was time to pull out and move their assets elsewhere. I sure hope an Obama administration decides to follow this money and see just where it went. I’m betting on offshore banks.

[editor’s note: originally posted at 9:41 am FDL time]

Jim White

Jim White

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