Economy's slowdown could worsen, market watchers say
Richard Drew/AP
Specialist Charles Jenness rubs his head as he works at his post on the floor of the New York Stock Exchange Tuesday morning, Jan. 22, 2008. An unusual emergency interest rate cut by the Federal Reserve gave Wall Street a partial rebound Tuesday from a precipitous early decline - and perhaps the first steps toward a long-term recovery. The Dow Jones industrial average, down 465 points shortly after trading began, bounced around throughout the session before closing with a milder drop of 128.11, or 1.06 percent, at 11,971.19.
An emergency interest rate cut reversed a steep drop on Wall Street Tuesday, but two of Charleston's brightest business minds said the U.S. economy already is in a slump that may grow worse in coming weeks.
Fears of a U.S. recession circled the globe Monday, spurring the Federal Reserve to drop its short-term interest rate target by three-quarters of a percentage point, the biggest one-day cut made by the central bank in at least 25 years.
The unscheduled action calmed global markets and helped buoy the Dow Jones industrial average to close just below 12,000, a 1.1 percent drop and its lowest level in 15 months.
Still, it was a big rebound from the plunge of 464 points, or almost 4 percent, that the index posted in early trading Tuesday following the rate cut.
However, two of Charleston's most successful investors said the market is reflecting the U.S. economy, which is headed for a slowdown and may already be in a recession.
Sallie Krawcheck, a Charleston native and chairman and chief executive of Citigroup's Global Wealth Management division, noted that a range of economic indicators — housing sales, housing prices, retail sales, consumer confidence — are heading south "at a pretty good click."
Krawcheck, who was in town to speak at a breakfast meeting honoring Dr. Martin Luther King Jr., noted that recessions are part of a healthy economic cycle, but she voiced concern that U.S. markets are declining relative to the rest of the world.
The ongoing credit crunch and the current market meltdown are unfolding "much more quickly than prior downturns," she said.
"Make no mistake, the world outside the United States is moving very, very fast," she said. "There are 100 countries around the world with growth during the last year of at least 4 percent, and the United States was not one of them."
Dick Jenrette, a part-time Charleston resident and co-founder of the Wall Street brokerage Donaldson Lufkin & Jenrette, was watching markets closely Tuesday from his home in St. Croix. He had been expecting a big drop in U.S. equities given the state of the economy and was not surprised to see the Dow slump.
"You had a pretty good correction in the morning, but with the Fed cutting interest rates we may have a dead-cat bounce," he said, borrowing an old traders' phrase for a temporary uptick. "I think there might be one more lunge down."
Jenrette said the economy is in a steady downturn and the government may exacerbate inflation by aggressively axing interest rates.
"They're definitely trying to ease panic," he said.
It's been a dark year so far for stocks. The Standard & Poor's 500 index, a broader measure of the stock market than the 30-stock Dow average, has suffered its worst annual start ever, giving up 11 percent in just three weeks.
South Carolina stocks have been hammered as well. Shares of Blackbaud Inc., a Charleston-based software maker, have fallen 5.4 percent to $26.12. Scana Corp., the Columbia-based company that owns South Carolina Electric & Gas, has plummeted to $37.85 since the New Year, a 10 percent drop.
Exacerbating the alarm Tuesday, Bank of America Corp. posted a 95 percent drop in fourth-quarter profit, and Wachovia Corp. reported that its earnings dove 98 percent in the last three months of 2007.
Matt Koscic, a Charlotte-based planner with National Financial Services Group, said he used Tuesday's frenzy to convince some of his clients to sell certain holdings.
"You have to look at it like a doctor," he said. "If you're cut, what's the first thing you do? You stop the bleeding."
But Koscic, who advises about 35 households and businesses on the coast of South Carolina, noted that some of the country's biggest companies are performing well and the current market anxiety will eventually be viewed as a "hiccup."
"Sometimes you have to think counter-cyclically," Koscic said. "There's buying opportunities all over."
Jenrette was doing just that on Tuesday, directing his dollars to big oil companies, big banks and other firms that deal in consumer staples, including AT&T Inc., Verizon Communications Inc. and Proctor & Gamble Co.
"It's a good time to do some nibbling, but you can never be sure where the bottom is," Jenrette said. "I think the fact that the U.S. didn't go cascading down today is certainly a hopeful sign."
Reach Kyle Stock at 937-5763 or kstock@postandcourier.com. Reach Peter Hull at 937-5594 or phull@postandcourier.com.
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Comments
This article has 34 comment(s)
Posted by whome on January 23, 2008 at 8:51 a.m. (Suggest removal)
why would any candidate address the issue? they'd rather give out $800 checks that your kids will have to pay for. Wake up and smell the coffee. American pseudo-capitalism (capitalism that talks free market, but is regulated to the hilt towards big corporations) doesn't work. The funny thing is that no saw the credit issue coming... Did anyone happen to notice how the bankruptcy laws were just changed in 2004?
To me the economic issues right now are the biggest challenge that this country has ever faced. Back in the depression, we were still for the most part living in our own pond. Now, the solutions to our problems have tremendous repercussions through the geopolitical world. The amazing thing is that the rest of the world's superpowers have realized the hard cold truth; it's not a coincidence that Vladimir Putin was voted the man of the year, as a$$-backwards at that is.
Inherently, our government with its 2-6 voting cycles is unable to solve a problem decades in the making that would take decades to solve.
The question is what is this generation's equivalent of the lunch counter boycott.
Posted by MinoritySouth on January 23, 2008 at 9:41 a.m. (Suggest removal)
I am impressed with the above postings. They are all pretty much right on the mark regarding the extrapolations of the country’s current position. This country is indeed pseudo-capitalistic from its days as an agricultural superpower at the expense a non-capitalistic relationship with it’s “black” citizens and later through welding those newly gained powers globally by creating advantageous foreign policies that were economically motivated without a moral compass that looked down the road and many times played one side of the fence and later the other side of the fence, while occasionally playing both sides of the fence at once, which to say the least, totally ticks the rest of world off.
Modern day example; our immigration problem is directly related to corporate greed. It was not the immigrants who got us into that pickle. It was those who are in control, with no economic moral compass. Well, now we are in multi-faceted precarious positions. Good luck to the next person who has to attempt to clean up this mess, whether it be President Elect George Bush (who knows, he is running the country after stealing the presidency, he may be able to get unlimited reign...? It would be poetic justice to have a King George Bush, though we regular people don’t deserve that) or write in.
Self preservation is ultimate make no mistake about that but we as a nation must also do the right thing and look down the road much further than we can throw for a change or this karmic exchange will continue.
Posted by SCdeacinNYC on January 23, 2008 at 10:17 a.m. (Suggest removal)
Early, China doesn't have to steal any technology. They and the other Asian Tigers are constantly ahead of the curve in technological advancements, while America suffers from a severe deficiency in science and technology advancements both economic and even medical advancements (the latter due to our concerns with religious factions).
The cameras, cell phones, computers and other pertinent technologies to our economic advancement that are brand new to us have been around there for at least five years. I remember showing my new camera to my friend after holiday break, and she (who studied in Japan and China) said oh you know that's been around there for years.
We are being short-sighted. Our education system is still built on a 1950s model and we are not prepared for the new economic models occurring in most industrialized countries. That WILL be our demise. We are unable to prove what makes us great in the world economy, especially when it comes to our manpower. Companies sell off their services to other countries with sometimes more skilled, educated employees than ours at a cheaper price. What is their incentive to stay? We are simply no longer able to compete. We need to re-structure our economy by first re-structuring our education system and modeling to be competitive on the world stage.
Posted by Edwin435 on January 23, 2008 at 10:32 a.m. (Suggest removal)
Correct Early ! Damn good post. We are no long competitive in the global market. China is producing good of lesser value with stolen technology and we continue to buy it. Nafta sucks and more jobs have moved out of the US because of labor cost that the piece of crap legislation has created. ( nice job Clinton)We serve out our labor to illegals, we buy cheap goods and the most disturbing thing that people are not getting is that foreign powers have purchased our debt. We need to adjust the trade deficit, curb our out of control spending, get back to saving money, and live responsibly. This greed will plunge us into a dark age. Corporate as well as private greed is the reason for this mess. Subprime lending and the housing bust will be hard to fix. Gold will go though the roof just like it did in the 70's. Thanks Carter. Reagan and Bush caused their share as well. I guess this long diatribe can be weened down to 2 things fiscal responsibility of government.... and fiscal responsibility of the people. Gordon Gecko was wrong. Greed is NOT good thing.
Posted by MinoritySouth on January 23, 2008 at 10:39 a.m. (Suggest removal)
Yes Citizen SCdeacinNYC, you are right. This country is too fixated on what the “blacks”, the Latinos and all other non-majority folks are doing. Too preoccupied with affirmative action and the Latinos welcomed here by our corporations and business people.
We need to be firing on all cylinders and if Paco Pele Jesus Rodriguez Lopez is the next Einstein to solve the energy crisis that is wrecking the economy at the same time that those same carbon fuels are causing a water shortage nationwide, educate him damn-it!!!!!! Give him and all the others citizens of this country a level playing field.
What has this country lost in the last 100 years because of its economic and racial biases? No one really knows but know this the world as we have known it has changed which requires this country to change with it or stand aside…
Citizen Early, I know the economic history of this country. I was simply making a point that a moral compass is necessary in economics or we will continue on the path that has created a “black” and “white” America and now this new “legal” and “illegal” America. Again these are all situations created by a lack of economic morals and our foreign policy is the shining jewel of this.
Posted by MinoritySouth on January 23, 2008 at 10:40 a.m. (Suggest removal)
Yes Greed was what made Slavery ok.
Posted by AFWally on January 23, 2008 at 10:46 a.m. (Suggest removal)
JohnQ is Hilarious
Posted by MinoritySouth on January 23, 2008 at 10:54 a.m. (Suggest removal)
We are no long competitive in the global market...Duh....
But I do agree, greed is a problem as I said prior to the genius who chimed in by repeating what I said without acknowledgement, or a pat on the back like was given to Early (Early as in he doesn't sleep very well so he perpetually posts comments to charleston.net). My feelings are now hurt... NOT...
We need an economic moral compass. Something this country has never exhibited. Slavery was a convenient reference since those are our beginnings as an economic world powerhouse.
MinoritySouth I call myself and not minority, though I am in a minority philosophically and oddly ignored when my opinions are congenially congruent to some.
Posted by AFWally on January 23, 2008 at 11:13 a.m. (Suggest removal)
what we really need is a revolution.....
Posted by Test2007 on January 23, 2008 at 11:21 a.m. (Suggest removal)
I know someone didn't say that Asian countries are stealing anything technology wise from America? Umm basically everything technology based comes from an Asian country (esp Japan). That is common knowledge. We even import their scientists and doctors (used to work at a hospital). General practitioners are fine but guess who the specialists are? Come on, take a guess. We always talk about how SC is at the bottom of the list on the education totem pole. Well, USA isn't doing too well either on the international list for education either. Want to guess who is? I can check the list again but I believe there are third world countries that do better than us in education. What the hell does that say about us?
Someone I know always said that the downfall of America was that we know longer made anything. We are now a service based country.
Posted by MinoritySouth on January 23, 2008 at 11:27 a.m. (Suggest removal)
Preferably peaceful…
Posted by MinoritySouth on January 23, 2008 at 11:34 a.m. (Suggest removal)
Test2007, you know this country is good at one thing... Revisionist history that seems to take credit for everything including freedom.
Posted by Edwin435 on January 23, 2008 at 12:18 p.m. (Suggest removal)
Minority South, I am sorry that I forgot to stroke your ego there. I will make it a point to give you all the credit you deserve in the future and I hope that this helps you in the future...NOT! If you read my post it also inconcludes fiscal responsibility which yours did not nor did it include national debt... But i guess you missed that sorry.
As for the person that actually didnt think China stole the technology, which rock have you been under? They constantly steal technology and pimp a low cost Sub par version to us all the time. They have engaged in corporate spying as well as government spying for a long time and since they have become an economic played this will only get worse. We rebuilt japan and gave them the technology.( thanks Edward Demming )They just improved it. ( with technology given to them by us. I was talking about china. Anything Else?
Posted by AFWally on January 23, 2008 at 12:21 p.m. (Suggest removal)
I've worked wih some exchange kids from Taiwan on technology projects, their 1oth and 11th graders are equivalent to our sophmores and juniors in our major universities and in some cases better. In Taiwan they focus on a child's capabilities at an early age and then capitalize on their strengths. Here we use the same old crappy system to get everyone on a level playing field. I worked with a 16 year old Taiwanese who spoke mandarin chinese, russian and english without missing a beat, plus he was a math and computer whz, not just computer games and understood aerospace and missle systems engineering concepts.
Posted by MinoritySouth on January 23, 2008 at 12:34 p.m. (Suggest removal)
Ah Citzen Edwin435 your Jedi mind trick will not work in this instance. You are right I didn't say anything about the national debt. I did not say anything about the war in Iraq either. Your point..?? The war, among other things are tied to the debt and both are very important. There is not enough time in any given day to list all the issues that this country has before it thanks to King Bush.
Posted by Edwin435 on January 23, 2008 at 12:36 p.m. (Suggest removal)
One final point MinoritySouth, If you look at the context of my statements you will see that they were not a parroting of your profound statements. The meaning and direction of my comments are pointed at us as well. People who try and keep up with the Jones and cannot afford it are also a major cause of our economic plight. This is not taking away from you corporate greed stance. It was meant to explore an avenue which you did not. In fact my comments are really not a parroting of yours at all. If I am not the target of your genius comment that please excuse my pointing out these differences. If I was the pint of that comment then please reread my post. Thanks you in advance.
Posted by MinoritySouth on January 23, 2008 at 12:36 p.m. (Suggest removal)
Gone are the days, to quote Governor Sanford in which “The 1895 Constitution that set today's governmental structure was built around the fear that a black man would be elected governor of South Carolina, and any structure built on this foundation is an insane model from which to run your government in the 21st century.” Yes, during the war “blacks” were running things and had actually set up what we know as the public school system which worked at the time but now it is time for a change or revolution…
The skewing of our educational system happens when for example; the Bar Exam was recently changed due to the complaints of influential members of the legal community so that their children could pass. That is a prime example of why we are behind.
We educate and put our trust in those who are economically influential instead of those who are capable or exhibit potential regardless of race.
I am not an educator but I work with educators and I was told by someone that a future grade school teacher said that she will refuse to teach an immigrant. First of all, she is an educator so why is she judging who is an immigrant and who is not. That is a legal issue. How will she determine whether or not a child was born here or whether the child’s parents did the necessary paperwork to give the child citizenship given the birth place? That is the same mentality that has poor citizens in the country at a disadvantage with their peers given unequal education factors.
We cheat ourselves from competing on a global level when these things are done.
Posted by MinoritySouth on January 23, 2008 at 12:41 p.m. (Suggest removal)
Ah, "Corporate as well as private greed is the reason for this mess." is what you said among other things. I am not mad at you for not wanting to agree with the MinoritySouth. :o)
Posted by suec on January 23, 2008 at 12:41 p.m. (Suggest removal)
The economy is like a ballon. It can only get so big. People can only buy so much.
Everyone is loaded up with the worthless junk they blow their paychecks on. Then they have to use credit cards to buy gas and pay essential bills. How is it the government's fault? Did they require that you take your December pay and buy a Wii, laptop and $200 pair of shoes, knowing full well that your new house has a ballon mortgage that starts next month?
Take responsibility for yourselves!
Don't go spend $100 eating and drinking out on the weekend, then groan about $50 for the gas tank fill up on Monday.
Posted by MinoritySouth on January 23, 2008 at 1:01 p.m. (Suggest removal)
And Citizen Curly, the lowering of interest rates has simply changed from economic stimulation to simply borrowing from Peter to pay Paul. Peter still wants his money... with interest. Peter today is the United Emirates and the like.
Posted by MinoritySouth on January 23, 2008 at 1:02 p.m. (Suggest removal)
And you may need to revisit as well Citizen Edwin435 it is not simply corporate greed but a predatory economic policy from the beginning. One that looks no further than the next dollar at the expense of individual lives, Native Americans, one time Africans now an entire new race and culture as well as the current so called "illegals" and yes I know there are a host of issues that are inter-related with each segment just mentioned and none of that can fix the current issue directly however it is all a litmus as to how we should chose our next steps because of the rate of change has, excuse the lack of creativity, changed.
Mistakes are paid for immediately relative to what this country has experienced in the past.
Posted by pag on January 23, 2008 at 1:13 p.m. (Suggest removal)
I am white. I'm presently typing with my white hands onto this white background. I have three white kids, a white ex husband, and a white boyfriend. I am proud of my german white heritage. I'm going to type about whites. White white white. Ahhh... just read all of minoritysouths comments... Sporting a little chip on that shoulder there buddy??? I felt a little forced to get back in touch with my white reality for a sec. I'm better now.
Posted by MinoritySouth on January 23, 2008 at 1:24 p.m. (Suggest removal)
If that is all you got out of what I wrote, tisk, tisk, tisk, that is sad. Also I do not hold a chip. I appreciate the life that has been made for me in America by all who came before me. The hard work of "blacks" and the financial savvy of others are reaped by me simply being able to take part in this discussion. Let's just say Citizen pag, my eyes are wide open like those of a actor in a mistral show regarding the economic morals and the foreign policy of this country and we can't continue down this road though it appeared to work in the past.
Know right, do right.
Posted by mosinfan on January 23, 2008 at 1:31 p.m. (Suggest removal)
Dont try to offer any facts about anything to John (no i) Q. The guy is blogging long distance from Mars. Probably the sasquatch looking figure sent back from the NASA rover "spirit".
Posted by MinoritySouth on January 23, 2008 at 1:42 p.m. (Suggest removal)
Citizen Curly, I mean Citizen E, you are right, the truth is not always pleasant or palatable and you have told a truth that does prick my heart. The lack of acknowledgement of economic moral issues is what frightens me most though.
If this economic rate of change continues we as a country could be subject to outsiders who have similar economic moral deficits making management decision with Dubai and the rest of the United Emirates buying our paper. 4% growth and we were not part of it and many think we are headed in the other direction.
I have over stayed my welcome. Remember karma and I wish you all well.
Posted by MinoritySouth on January 23, 2008 at 2:05 p.m. (Suggest removal)
Citizen Curly, you will have lots of fun as a eunuch in a Dubai concubine.
Posted by MinoritySouth on January 23, 2008 at 2:09 p.m. (Suggest removal)
Just kidding...
Posted by msplacedinsc on January 23, 2008 at 2:33 p.m. (Suggest removal)
Well put suec, we wake up everyday to the tune of "you need to buy this" or "if your somebody you need that", americans want it all but complain when they must pay. Americans need to wake up and start saving their money if not they lose.....cause who ever has the most $$$ when retirement or a recession, or a major issue arise "WINS". You need to make a choice?
Posted by suec on January 23, 2008 at 3:04 p.m. (Suggest removal)
What worries me is that even though I am frugal and save, we may end up with a president who wants to take what I have saved and what I earn, and give it to people who chose, and "chose" is the key word, to waste their income.
A woman told me the other day that her daughter (grown with 2 kids and living off of Momma, Daddy and the government) will be soooo glad to get her income tax check this year. She will get almost 4k and cannot wait to be able to take a vacation (from her part time fast food job).
This is the type of person that we are footing the bill on.
I wish we could trade her to Mexico for a couple of hard working self suffieciant latinos!
She's going a cruise while I diligently save, only to have my tax money buy her groceries and pay for her housing and healthcare.
Posted by AFWally on January 23, 2008 at 3:18 p.m. (Suggest removal)
I'm thinking "Best of Both Worlds"
JohnQ and Minority S a truly lovely tag team
Posted by MinoritySouth on January 23, 2008 at 3:57 p.m. (Suggest removal)
That is funny Citizen AFWillie,
That says a lot about you because I actually agree with an astute observation of yours...
AFWillie quoted "In Taiwan they focus on a child's capabilities at an early age and then capitalize on their strengths."
MinoritySouth quoted as saying "We educate and put our trust in those who are economically influential instead of those who are capable or exhibit potential regardless of race."
Posted by msplacedinsc on January 23, 2008 at 3:58 p.m. (Suggest removal)
suec, it's not just this family, our government that spends billions of our tax dollars on programs for other countries! My wife and I have a great friend in DC who works for a non-profit co. who helps afganistan & pakistan families with what our tax dollars. We would rather see our tax dollars help AMERICANS who pay those taxes. The old good USA can't afford to pay the tab here and abroad anymore. Tell that to a career politican? Save your hard earn cash as much as you can, pay off your c.c every month and by all means quit blaming every illegal person in this country that a u.s. citizen can't save money. It's a crock of poo!
Posted by msplacedinsc on January 23, 2008 at 4:04 p.m. (Suggest removal)
By the suec, FYI my wife is a boat person from vietnam, arrived here in 79' w/ her family, I gew up with 5 brothers who's parents weren't college educated, we both worked hard to get a college education and are frugal in many ways, others ways no but it pays offs when we want to something nice. Our motto at our house is "stop blaming others for your bad choices, get up, go to work, and pay yourself at the end of the week! Enjoy chat'n w/ you....
Posted by suec on January 23, 2008 at 4:44 p.m. (Suggest removal)
I really don't mind my tax dollars helping people in other countries. I have been on several mission trips to 3rd world countries and beleive me, they need it.
They don't have the opprtunities that we have here, For us to go to another country and help them survive and be self sufficient makes sense. For us to give a woman free food and housing here so that she can go on a cruise, is just wrong.