The DOW yesterday reached 7,062.93 only a month and a week after the Inauguration of President Barack Obama.
There is no correlation suggested between the DOW and the inaugurals, nor this particular President. We mention this because we predicted a significant drop in the DOW, to figures between 7,000 and 7,400 in this general timeframe. Our prediction of a marked drop in the DOW before or by Inauguration Day rang absolutely true. Clearly, our suggestion of the DOW dropping to that range are now confirmed.
Previous predictions by the Institute have been accurate as well. But our prediction that the DOW will bottom between 7,000 and 7,400 are unfortunately now revised downward. This low does not, much to our dismay, mark the long sought-after bottom.
We had predicted too, a steep decline in US GDP, which was confirmed yesterday when Commerce Department revisions showed a 4th Quarter drop of 6.2%; a serious and dramatic revision from the 3.8% drop previously reported.
We also reported some time ago that the plans submitted to Congress by Detroit automakers predicting US sales in 2008 and 2009 were unrealistic. As it turns out, our analysis proved true. While GM was projecting sales at 13 million autos, actual sales came in around 8 million, with, exactly as we said, a serious drop in sales in the 4th Quarter.
Though this might seem to be a suggestion that we were right and others not, in truth, it is merely the suggestion that our track record should indicate that our analysis is definitively on target and that we’re using better, more accurate economic measures than even the Commerce Department, a Federal agency. This isn’t about “I told you so”, but about guiding our readers towards a much more accurate and predictable future.
In a call to a member of the NJ Delegation in the House, we predicted on a particular day, that the DOW would drop 300. That call made at 8:35AM. At 4PM, as the bell rang on the NY Stock Exchange, the DOW had fallen 299.8, finally settling at 297.8 below the open. We also predicted in that same call that the DOW would be flat the next day if that 300 point drop took place. The following day, the DOW closed up only 3.03.
How do we make such accurate readings and predictions of market conditions and trends? Well, we don’t use a crystal ball, if that’s what you’re thinking.
Instead, we use a complex set of assumptions including world news prior to 9AM, the average of DOW futures between 5AM and 6AM; and a calendar of predictable financial reports.
So, when we hear that there has been bank failure in Eastern Europe and this is harming Western European banks, and we see the FTSE, CAC40 and DAX all down, with futures between 5AM and 6AM averaging a negative 200 points and we know that at 10AM a key financial report is to be issued that is easily assumed to be negative (like retail sales or consumer confidence, housing starts or GDP), we can reasonably calculate that the DOW will drop that day by X figure.
Barring any additional extremely bad or good news during the day’s news cycle that markets are not poised to absorb, our predictions are generally very accurate… and we’re not selling snake oil, high yield CDs or get-rich-quick offers. In fact, we don’t sell anything but to support our consulting services, which are not as prognosticators of market trends.
This Institute, intended to focus on economic conditions, trends and political science is here to provide information and resources to both our consultants and clients. We don’t play the markets, invest in stocks or bonds, real estate or other investments of any kind. In fact, our charter prohibits us from such investments.
Our major focus, since 2007 has been on changing the way banks function with the goal of helping them to succeed and grow safely. We believe there are fundamental flaws in the banking process that must be addressed in order for that industry to recover in the long and short term. This is why we’ve been petitioning Congress to enact reforms that would effectively make the lending process itself a safer system. Once lending is made sound, we firmly believe this crisis will end in short order as investors return to the securitization markets and banks resume lending.
The quesiton becomes… is anyone in Congress listening? If so, we’d like to hear from you. In fact, the world would like to hear from you!