What Can Dentists Do To Protect Themselves?

I know the economic news is bad, how low can it go? The pain we have experienced in these past few weeks cannot continue, but that doesn’t mean we have seen the bottom or that stocks cannot fall from here. And history agrees.

Have a look at the average P/E ratio of the entire S&P 500 index over these three periods of market meltdown:
Period Average S&P 500 P/E Ratio
1977-1982>>>>>>>>>8.27 times
1947-1951>>>>>>>>>7.78 times
1940-1942>>>>>>>>>9.01 times

Compare that to what used to be an average P/E ratio of around 20 times and it's pretty apparent that stocks could fall much, much further than they already have, if they haven’t already by the time of this writing, just by returning to the lows they historically hover around during downturns. It would be useful to know what the average P/E ratio of the S&P 500 was just prior to these three market meltdowns. However, we do know about how much debt the government has had relative to GDP at the time of the Great Crash of ’29. Prior to the 1930s, the total debt in the U.S. was between 150% and 160% of GDP. Now it's close to 350% of GDP and it includes derivatives which it barely did prior to the 1930s.

How can you best protect yourself? Make sure you look at the P/E ratio going forward into this market and watch consumer sentiment.

Now, assuming earnings stay flat, and there is lots of evidence of that:

Manufacturing falls to lowest level in 26 years
The Institute for Supply Management said the index of national factory activity fell to 38.9 in October, the lowest in 26 years. Any reading of less than 40 is considered extremely weak. Economists were expecting 41.5, down from 43.5 in September. "It means we're in a recession, it's as simple as that ... a pretty solid manufacturing recession," said Robert Macintosh, chief economist at Eaton Vance. Reuters (03 Nov.)

Over one million jobs have been lost in the last 12 months. In September, another 159,000 jobs, in October 250,000 jobs disappeared.

Revisiting those historically low P/E levels could easily mean a decline from here, but how much further will it go, a DOW 5,000? When the Dow Jones Industrial Average touched its nominal low of 7,884.82 on October 10th, it had already lost 77% of its value when looked at from a real inflation-adjusted equivalent using 1977 dollars, or about a DOW 2,550. Also, on October 10th, 87% of all stocks on the NYSE hit new 12-month lows.

That kind of downside breadth exhaustion, where more than 50% of NYSE stocks hit 12-month lows at the same time, has occurred only four times — in 1962, 1966, 1970, and at the crash low of 1987.

Each one of those data points was at or within a few weeks of a major bottom.
When looked at in these real, inflation adjusted terms, this also means that the bulk of deflation is already past us. That’s good news for commodities. Of course, I’m not making any recommendations. I'm just taking a long look at history.
As difficult as it is right now, following the "this too will pass" philosophy really does work. The majority of stocks -- are worth much more than a measly 8 - 10 times earnings. The only thing that pushes the average stock to such scary levels is an overdose of panic and that is exactly where we are today.

The next few years are likely to be extremely volatile with all the markets, including real estate as we see-saw between greed and panic in the irrational market dynamic we are in.

What will the Dow Jones Industrial Average look like today? What percentage will it be off its high? In the 26 bear markets since 1900, it has declined more than 50% only twice -- 90% in 1929 and 52% in 1937. (In the tech wreck of 2000-2002, investors lost 78% of their money invested in the average Nasdaq stock.) And then, taking a deep breath and another long look at history, it goes up!

But with the recent increase in the money supply, isn’t that always inflationary? What is happening to gold? The answer is that inflation was yesterday’s problem, today’s is deflation and all that changed in October when global recession became evident and that eliminated any upward movement of prices. Money has to be spent in order to be inflationary, but with so much new money entering the system won’t that contribute to growing the economy? That is the hope and yes, when that happens it will be inflationary and then gold will go up, but that’s looking more long-term, after the panic subsides, meanwhile it is scary out there. Prices for commodities have collapsed, precious metals have experienced the biggest drop in 25 years. As global markets collapse, investors rush to exit for US dollars leaving European and UK banks the most exposed to the emerging economies debt obligations given that 45% of developing world loans originated from Europe relative to only 9% originating from the US and Japan. This bodes well for US currency strength going forward.

BRIC hard hit by crisis; funds see plummeting share prices Investors in funds specializing in BRIC -- Brazil, Russia, India and China -- have taken huge hits throughout the economic crisis, seeing the funds drop 60% or more in share prices. Analysts said BRIC will remain a principal engine of global growth for the medium and long term, but investors looking for short-term gains would do better buying U.S., U.K. or European equities. Telegraph (London) (21 Oct.)

Wall Street, Washington dictate course of global markets
Trading on a global level begins each day in Asia and the Pacific Rim, but more than ever, Wall Street and Washington are the driving force. "The data very nicely and scarily show that the U.S. is dominating the behavior of investors around the world," said Frank Nielsen, executive director of MSCI Barra. "There has been no decoupling of markets at all during this crisis. It all seems to be driven on the basis of what happens day to day in the U.S." International Herald Tribune (03 Nov.)

Global capital flow has shifted direction due to the deterioration of credit and is moving towards less risky assets, and surprise, it is not gold – it is US treasury bills, (not bonds).

Remember back to 1989 when Japanese consumers, after being crushed by the stock market crash and watching real estate investments crumble, weren't interested in borrowing anything at any rate – well, that’s where we are at right now. The fear is that people shun borrowing, lending and investing like they did in Japan. The lesson from Japan, is that it doesn’t matter how much money you throw at the problem, until people start rationally investing in a risk taking approach, nothing moves. In Japan's long bear market, which stretches from 1990 to the present, investors have lost 82% of their money from peak to trough in companies that make up the Nikkei average.

What does this mean for the US dollar? The US dollar has entered a multi-year bull market. The US dollar is the Imperial Currency around the world for investment, backed by the US military and a 14 Trillion dollar economy, nearly 3.5 times larger than China’s. This recent crisis has confirmed this and that for the short-term, relative to gold, it is very valuable paper because investors around the world have put their faith in it as the big elephant in the room. Therefore, the US dollar is King! As the dollar goes up, the value of oil goes down. When global markets are growing and money is flowing, then investors will seek the risk return of developing economies and then the commodities demand will resume.

But until then, why can't the U.S. government simply create more inflation, print more money to pay for it? Because if U.S. government issues bonds to borrow money. It depends on you, or the market on investors, to buy the bonds to loan the government the money, to finance the U.S. government. The U.S. government needs you to hold the U.S. bonds you've already bought. Plus, it needs you to buy more new bonds to finance all the new spending and deficits. In order to raise this money for the government, it must retain your confidence, your trust. To do that, it cannot run the printing presses or destroy your money. Instead, it has to let the deflation and depression run its course. And the biggest question of them all is, do you think the government’s manipulating the currency, writing new laws, and changing the banking structure — will be a match for the power of the markets; consumers, investors and bankers?

Market turmoil ironically boosts long-suffering dollar
In an ironic twist, the currency of the country that created the credit crunch is now a haven for frightened investors, driving the dollar up in value by 15.5% against a basket of currencies since Aug. 1. As stock markets plummeted again Wednesday, the dollar achieved significant gains against its European counterparts, with the pound falling to $1.6242, a five-year low, and the euro dropping to $1.2843, close to a two-year low. International Herald Tribune (22 Oct.)

Gold falls to less than $700 per ounce but rebounds slightly
Gold futures fell $20.50 on Thursday and closed at $714.70 an ounce on the New York Mercantile Exchange. At one point during the day, the metal fell to less than $700 an ounce. The decline was likely because of the rising U.S. dollar and massive fund sales. MarketWatch (23 Oct.)

Turmoil resurrects U.S. dollar as world's reserve currency
The financial crisis has seen investors voting with their cash and buying U.S. dollars, indicating that reports of the dollar's death as a reserve currency were greatly exaggerated. Investors quickly understood that the U.S. is the only nation with the political will to act quickly and the government and private-sector infrastructure to implement necessary policies. Reuters (28 Oct.)

China launches $586 billion economic-stimulus plan
Days before Chinese President Hu Jintao is set to meet with Group of 20 leaders in Washington, the country's State Council announced a spending plan that allocates $586 billion through 2010 to stimulate the economy. Hu is expected to be under greater pressure to play a bigger role in battling the global financial crisis. China plans to spend the stimulus package on projects including roads, airports, railways and the power grid. ClipSyndicate/Bloomberg (10 Nov.) , The Times (London) (10 Nov.) , International Herald Tribune (09 Nov.) , The Wall Street Journal (subscription required) (10 Nov.)

Treasury's change to tax policy boosts banks, angers lawmakers
While Congress debated the White House's proposal for a $700 billion banking rescue, the U.S. Treasury quietly changed tax policy that resulted in a $140 billion windfall for American banks. Lawmakers did not immediately notice the sweeping change made to more than 20 years of tax policy, but some were furious when the change came to light. "Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no," said George K. Yin, the Joint Committee on Taxation's former chief of staff. "They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks." The Washington Post (10 Nov.)

Fed won't say which banks got $2 trillion in emergency loans
Bond investors said secrecy from the Federal Reserve regarding its $2 trillion in emergency loans to banks -- including its refusal to identify the banks, the assets being accepted as collateral or the methodology used to value those assets -- is crippling the ability of financial markets to recover. Fund managers said this lack of transparency is a serious problem because "the market is very nervous and very thin." The nation's biggest banks declined to comment on whether they borrowed from the Fed. Bloomberg (10 Nov.)

Asset-backed lending dries up, shuts out commercial mortgages
Regional banks and insurance companies, the primary sources for commercial real-estate finance after credit markets froze, have completely stopped lending for this market, analysts at RBS Greenwich Capital Markets said. Thawing of short-term markets was a welcome first step, but "it is a baby step" that does little for commercial real estate, analyst Lisa Pendergast said. Bloomberg (07 Nov.)

Using probability theories, you are better off using stocks, over bonds to earn an inflation-adjusted return of investment to meet your retirement goals. While this is statistically true, it doesn’t mean it is individually true for you, it depend entirely on what your investment horizon is, market performance when you remove your money, and on how long you live.

The irony here is that the longer you work, the less time you have for retirement. The reality before this current crisis was that 80% of dentists could not afford to retire at age 65 in the same standard of living that they have grown accustomed to. The moral to this story is that you had better like dentistry, because in all likelihood, you are going to need to keep working.

What other markets can you consider? Already, in 2008, one in ten American homeowners has defaulted on their mortgage or lost their home in foreclosure. Nearly two in ten about 7.63 million properties, or 18%, had negative equity in September, according to a report by First American CoreLogic; that means they owe more than their home is worth, many of whom haven’t even begun to pay off the principal in no-money-down, interest only first mortgages that were “given” away.

Experts see danger in near-doubled "underwater" mortgages
About 12 million U.S. homeowners find themselves "under water" -- owing more money on their mortgages than their homes are worth -- compared with 6.6 million at the end of last year. Economists see this as a serious threat at a time when unemployment is rising. Reuters (21 Oct.)


What’s different this time than in 1929 was that the stock market crashed first, then the housing market. People didn’t borrow money to own their homes back then and there were no variable rate mortgages. The big question ahead is what will be the “fair market value” for homes going forward? Where will the bottom be? If the US sinks into depression, then that phase of the housing crisis where home prices rapidly sink in value hasn’t even happened yet, let alone what is going to go on in commercial real estate.

Another irony is that debt is the fuel for expansion by speculation. With debt, prices can be increased beyond sustainable levels ultimately because of greed. We have seen this kind of boondoggle before with the Dutch Tulip mania of the 1630s, South Sea land bubble of the 1700s, and the stock market panics of the early 1900s before the Federal Reserve banking system was established. It’s ironic that it is this same Federal Reserve Banking system combined with deregulation (loss of prudent oversight) that most directly contributed to this mess. Mortgages represent only 42% of the private-sector debt problem in the country; the other 58% comes from consumer debt and corporate debt. An astounding 40% of houses and condos were bought as second homes or investments.

So, today Americans are under huge pressure to sell their homes and second homes due to their other financial burdens ranging from their credit card debts to job layoffs. To make matter worse, Wall Street bundled up their mortgages (their promises to pay often based on no down payment, no income, no proof of assets, and interest-only payments for a few years…) and then resold them as securities that could be traded much like stocks and bonds. These securities, in turn, were bought by banks and investors in the U.S., Europe ( who intern invested in the developing economies around the world with the money assured from these same faulty mortgages, now repackaged as a CDOs, Collateral Debt Obligations), and Asia. To put this in perspective, European banks' exposure to emerging market loans is roughly six times as large as the United States' exposure to subprime mortgage-backed securities. Hence, the makings of the global credit crisis.

IMF running out of money to rescue emerging economies
The International Monetary Fund is burning through its $200 billion reserve fund so quickly that it may have to ask the West for more money or exercise its rarely used power to issue "special drawing rights." The drawing rights allow the IMF to create liquidity by acting as if it is the world's central bank. This was done briefly after the fall of the Soviet Union but has never been systematically used as a policy tool in a financial crisis. Telegraph (London) (27 Oct.)

To give you an idea of the size of this transfiguration, the total amount of mortgages transformed into these CDO securities: $4.8 trillion, that is 60% more than the total value of all the stocks in the Dow Jones Industrial Average. Phew! Then, in just one year — 2006 — $2.4 trillion in new mortgage-backed securities were created, more than triple the amount of just six years prior. Between 2005 and 2008, for example, Fannie Mae (a government mortgage corporation) purchased or guaranteed at least $270 billion in subprime mortgages — high-fee loans to high-risk borrowers. That was more than three times as much as it had bought in all its earlier years combined. So, I guess the speculators showed up in 2006 and bid up credit default swaps (new derivative securities that function like insurance on these bundled bad equity home mortgage loans, CDOs, except you don’t have to experience any loss to benefit from, for example, Lehman Brother’s downfall who you “insure” against this happening to benefit). There is not enough accountability in the system, no oversight.

Newest estimate of default swaps smaller than thought
Data from the Depository Trust & Clearing Corp. provide a clearer picture of the size and nature of the market for credit-default swaps than was previously available. The company said in the first of a series of weekly reports that there is $33.6 trillion in credit-default swaps outstanding on corporate, government and asset-backed securities. The figure is substantially lower than earlier estimates that ran to $50 trillion or more. The New York Times/DealBook blog (04 Nov.)

How do dentists protect themselves in today’s economy with unethical and unregulated markets? First, don’t blame yourself and don’t look back, the world has changed, look at what is happening now. Second, don’t count on the government to save the day, whether though social security, increased oversight, or tax relief. Third, don’t underestimate the depth, speed or duration of this “correction”.

Rating agencies "drank the Kool-Aid," Moody's CEO says
Raymond McDaniel, CEO of Moody's, told Congress that in the run-up to the financial crisis, the three major credit-rating agencies -- Moody's, Standard & Poor's and Fitch Ratings -- were trapped in a race to the bottom, forced to lower standards to maintain market share. Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform, said that race was lucrative for the rating agencies in the short run but disastrous for the global economy in the long run. MarketWatch (22 Oct.)

Greenspan says crisis "found a flaw" in his thinking
Alan Greenspan, former chairman of the Federal Reserve, told a congressional committee that he made "a mistake" in thinking that self-interest would force banks and other financial institutions to protect shareholders. He said he wrongly assumed that lenders would carry out proper surveillance of their counterparties. On the other hand, Greenspan said the kind of heavy regulation that could have prevented the economic crisis would also have damaged growth in the U.S. Financial Times (23 Oct.) , The Wall Street Journal (subscription required) (24 Oct.) , BBC (23 Oct.)

What do I mean? Well, this latest rally is sure to be a dead cat bounce but if I am right there are likely to be a few between now and year end. On Thursday, we learned that the U.S. economy actually shrunk in the third quarter; that consumer spending, the discretionary income consumers have available, had plunged to the lowest level since 1947. Not until consumer confidence returns can you expect to be safe in the markets, until then, these are and will be very interesting times.

U.S. consumer confidence falls to all-time low
As the financial crisis settles in, the U.S. is seeing its lowest consumer confidence since the Conference Board index was created more than 40 years ago. It fell to 38 in October from 61.4 in September, far less than the 52 that economists predicted. Consumer spending accounts for about 50% of the country's GDP. Financial Times (28 Oct.)

U.S. economy slides on decreased investment, spending
The U.S. economy contracted in the third quarter to a 0.3% annual rate of growth, the most drastic slump the country has seen in seven years. Contributing factors include decreased consumer spending and lower business investment. "The mortgage meltdown is far from over; the economy and financial markets are still reeling from it," said Janet Yellen, president of the Federal Reserve Bank of San Francisco. Reuters (30 Oct.)

MasterCard says Americans chop spending, avoid luxury goods
According to SpendingPulse, a data service of MasterCard Advisors, Americans cut their spending by a lot in October, especially avoiding goods costing more than $1,000. Sales of specialty apparel, women's apparel, footwear, electronics and appliances all fell, and luxury items saw a serious slump. "If you take out the purchases above $1,000, the sector is really down about 10%," said Michael McNamara, vice president of MasterCard Advisors. Reuters (05 Nov.) ct.)

Study suggests election will have little impact on markets
Although politicians do have some influence on the economy, analysts said it likely will not matter much whether John McCain or Barack Obama is in the White House. Instead, they said, stock markets can only rise in the coming year. Many studies have examined the relationship between presidential elections and stock markets. A study by Robert Johnson, managing director of the CFA Institute's Education Division, Northern Illinois University professor Gerald Jensen and University of Wisconsin professor Scott Beyer suggests that the real influence comes from the Federal Reserve's monetary policy. The Associated Press (03 Nov.)

Business groups brace for more regulation
Business groups are preparing for more regulation regardless of who comes out on top of elections in the U.S. on Tuesday. At the same time, they are warning that more regulation could hurt, not help, the already-battered economy. "The pendulum never stops in the middle," said Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce. MSNBC/The Associated Press (02 Nov.)

How do you ensure you won’t run out of money during your planned retirement?
Well, that depends upon when your planned retirement is? If it is within the next 5 years, you are better off out of the market in short-term US treasury bills, sell on the rallies. Your exit timing relative to the markets is another key, otherwise, to best protect your self - keep on working! And remember you are more than what you do, - keep on “being”!

If you are in it for the long-term, remember what history has shown us as to America’s constant growth, and realize, that this growth must continue in the capitalist system, with implied built-in inflation due to this growth which until now, managed between 2-3%, seemed like “the golden point” to avoid run-away inflation and still stimulate enough growth to manage a favorable return, as the history of the stock market attests. So, in this best-case scenario, stay invested, keep your head down, and keep working. And remember, the US economy is a 14 Trillion dollar economy; China’s economy is a 3 trillion dollar economy, and there is a world of difference in magnitudes of scale between them, something that will keep the US economy dominant long into the foreseeable future.

If you find comfort in both my arguments, “stay invested vs. convert to US treasury bills”, then consider, converting 50% of your equity and bond portfolio to cash (US Treasury Bills) selling on the rallies.

The Fed, indeed all central banks' attempts to re-inflate asset prices, should soon begin to have an impact on markets. There is a meeting this week, organized by Bush to call together all the central bankers and decision makers together to re-new the financial system. The rules could change again, as I suspect they will like they did back when the Bretton Woods Conference met previously, in 1944. They took the dollar off the $20/ounce of gold standard, and created the World Bank and the IMF. Then again in 1971 the US went off gold standard entirely and became the world’s currency, the dominant economy involved in all growth economies, and backed by the US military… So, we were a bigger global economic force in the ‘70s than today, however we are still the elephant in the room, and as the elephant goes, so goes the rest of jungle.

G-20 leaders plan to speak with united voice on crisis
At the Group of 20 summit in Washington this week, world leaders will strive to stand united about dealing with the economic crisis. Many observers said their actions may not be as united as their rhetoric. The French want to establish a regulatory regime, but the Americans are wary of the concept. The British are seeking to make the International Monetary Fund more powerful. The Russians oppose the idea. G-20 ministers met in Sao Paulo, Brazil, during the weekend to prepare for this week's meeting and to discuss a global economic-stimulus package, but they did not approve a final plan. The Wall Street Journal (subscription required) (10 Nov.) , International Herald Tribune/The Associated Press (09 Nov.)

The key to working out of this credit crisis at this meeting is coming to an understanding that debt defaults cause deflation; and deflation causes debt defaults. In this crisis, however, it could be competitive interest-rate hikes that emerge as a catalyst for depression. They will do, however, what they can do to lower interest rates. What’s more, in this summit of summits, they need to convince billions of consumers, millions of investors and thousands of bankers around the world to take on more risk!

But how far can all of this go, in the past 2 month we have spent 2.7 trillion in unplanned rescue funds.

Your decisions in the coming weeks could make the difference between a successful career or a lifetime of struggle; I hope I have stimulated you to have a plan, and be prepared to act prudently while being agile. Change is happening so fast with this crisis; just the size of it is mind-blowing:

Just look at how far the U.S. Treasury and Federal Reserve have already gone out on a limb to fight the debt-and-deflation spiral. They’ve loaned, invested, or committed:
1.
$2.7 trillion to bail out the financial crisis, (total rescue money announced), but it’s still not enough.
2.
Based on the Federal Reserve's Flow of Funds report, there are now $52 trillion in interest-bearing debts in the U.S.
3.
Based on estimates provided by the U.S. Government Accountability Office and other sources, it's safe to assume that there are also at least $60 trillion in contingency debts and obligations now starting to kick in — for Social Security, Medicare and other pensions.
4.
Separately, the Bank of International Settlements reports that the total value of debts and bets placed worldwide (derivatives) is $596 trillion in derivatives worldwide (all outside the purview of any established exchange). And so you can see how the leg bone is connected to the hip bone, and how these original US sub-prime mortgages amounted to so much bad debt that began by affecting the original home owners, then the banks, then Fanny Mae, then the Insurance companies got involved on this debt and finally the derivative securities, A.K.A. Collateral Debt Obligations which fueled the speculation and manipulation used by powerful hedge funds and investment houses.
5.
As all this is happening in the background, for the first time, the Federal Reserve's balance sheet exceeded $2 trillion as the central bank continues to lend huge sums of cash to financial institutions to keep short-term funding markets alive. The Fed's balance sheet grew from $1.953 trillion Oct. 29 to $2.058 trillion Wednesday. Banks pulled back on direct borrowing from the Fed's discount window, but the industry remains dependent on the lender of last resort. CNBC/The Associated Press (06 Nov.)

Now, in response to massive government bailouts, and the re-writing of the rules of the game, we’re witnessing a temporary easing of the credit markets, and investors are hoping the worst is over. The market recovery cannot last very long in this environment, and as the global recession takes its toll on financial companies, it’s likely to be followed by a larger, still more powerful wave of debt collapses, for another swoop downward.

If you don’t like this ride, ask yourself, do I really want to participate in another? With all this market volatility right now, surely we have entered a downdraft crisis. Remember, in Oct of 2007, we were in the 1400s; that was one year ago? Have we already corrected to a near bottom? Regardless, the real question is whether or not you think all this financial wizardry is sustainable going forward? Do you think bigger is always better for an economic return, what about a societal return? Who do you want to be beholden to the tax payer or the shareholder? And is what you see in your community positive and healthy? If you are as confused by all this as I am, maybe you might want to consider taking some time away from the markets, and just sit on some cash (Treasury Bills) and wait it out to see if the economic storm of the century establishes itself or not, to see if there is something the governments can do to, to encourage consumers to direct it back out to sea again.

Meanwhile, assuming you get out on a rally and there should be a few rally opportunities between now and the New Year, I offer, it’s better to have a bird in the hand than two in the bush. How to protect yourself in these far from certain markets; how about taking 6 months out, just to see how this all unfolds?

Fannie, Freddie, officials create program to help homeowners
Fannie Mae, Freddie Mac and officials in the housing industry worked out a program to reduce monthly payments for hundreds of thousands of homeowners to 38% of their income, sources said. The parties involved used a combination of interest-rate reductions, extensions and reduced principals to get to the level, which is considered an affordability threshold. The effort is an expansion of initiatives by the Hope Now Alliance. Bloomberg (11 Nov.)

Treasury close to second rescue for Fannie Mae:The U.S. Treasury is on the verge of injecting as much as $100 billion of fresh capital into Fannie Mae, only three months after the government took over the corporation. The Treasury is worried that mortgage rates will soar if Fannie is forced into liquidation, making it enormously difficult for the housing market to climb out of its worst slump since the Great Depression. Analysts said a Treasury infusion for Fannie and Freddie Mac would boost market confidence and eventually help loosen up the mortgage market. Reuters (10 Nov.)

Survey suggests longer, deeper recession in U.S. than expected
A survey of 49 economist by Blue Chip Economic Indicators points to contracting GDP in the U.S. well into 2009, with Britain and Japan also experiencing deep recessions. The economists' median forecast calls for U.S. GDP to fall by 2.8% in the final three months of 2008 and by 1.5% in the first quarter of 2009. They expect feeble a GDP growth of 0.2% in the second quarter next year. MarketWatch (10 Nov.)

Investors factor in slowdown, drive oil close to 20-month low
The price of oil fell to a midday low of $58.55 on Wednesday in Asia as decreased consumption of gasoline and other oil products sank in. Commodity strategists said it is obvious that global growth will be "pretty awful" next year and not much better in 2010. Slowing demand for crude in China is a big factor for slumping prices. BusinessWeek/The Associated Press (11 Nov.)