It all began with Shanghai's 8.5% drop
The dramatic selling began overseas. China's Shanghai Composite plummeted 8.5%, wiping out all of its massive gains so far this year. Not only has an apparent bubble in Chinese equities popped, but the country's economy may be slowing much faster than feared.
-CNN
-CNN
We are, by definition, in "correction mode" in the U.S. stock market, defined as a drop of 10% or more. The Standard and Poors 500 index is off 11% this week. T'ain't nothin' compared to China, though. They lost 8.5% yesterday and 8% more today. Zhongnanhai cut interest rates today. In a little under two hours the Shanghai market will open for another day and we'll see if it did any good.
Price/earnings ratio or p/e, is to corporate evaluation what earned run average, e.r.a., is to baseball pitcher evaluation. 15 is the p/e watershed like 3.00 is in baseball and the U.S. stock market as a whole had a p/e of 17 before this correction, so "I don't think it's going to have a very serious downward direction from here," [Wilbur Ross] old CNBC's "Squawk Box." "But I think there will be lots and lots of volatility around whatever is the midpoint."
And then there is this bright forecast by former U.S. Secretary of the Treasury Lawrence Summers:
As in August 1997, 1998, 2007 and 2008 we could be in the early stage of a very serious situation.
Thank you, Larry! Come my monthly direct deposit in six days, I'm with this 27 year old:
"In St. Louis, Shannon Miller refused to check her 401(k) plan Monday, just to stop herself from having a knee-jerk reaction to the stock plunge."
