The markets are closed for the week. Today's headline on CNN reads: "Dizzying Week Ends On a Whimper," as the markets closed up for the second day in a row.
The story below that headline reads in part, "Friday's action paled in comparison to the wild 4-5% swings investors were faced with earlier this week. On Monday, the Dow plunged 635 points, only to reverse course and jump 420 points the following day. On Wednesday, the Dow sank 520 points followed the next day by a 420-point recovery."
Throughout the week, the news media sought the expertise of UCLA Anderson faculty to provide insight into stock market's rollercoaster ride. In addition, the latest version (July) of the Ceridian-UCLA Pulse of Commerce IndexTM was released, allowing UCLA Anderson Forecast Director Ed Leamer (also the chief economist for the Ceridian Index) to offer some wider perspective on the economy.
Lecturer Gordon Klein is an expert in tax planning, entrepreneurship, and commercial law. In the video below, he spoke to ABC News about Standard and Poor's decision to lower the credit rating of the United States. At about the 2:07 mark he says:
"The administration and Congress have to come together and reassure people we're going to get our budget problem under control. That will keep S&P happy. That will keep the world markets happy. It doesn't have to be done instantly, it doesn't have to be done precipitously, but it does have to be done in a fashion that says to people we're serious about getting our budget problem under control."
"The banking crisis had to do with individual banks and the financial markets. It didn't have to do with the country's ability to pay it's debts ... It's unclear exactly why Standard and Poor's did this now. We know we had just come off a lenghty negotiation about the debt ceiling and I think part of the reason that Standard and Poor's did this is because they wanted us to reduce the deficit more and they were concerned about the political process. But neither of those things really affect the ability of the United States to pay and that's reflected in the fact that Moody's and Fitch did not downgrade the debt."
Ed Leamer notes that the Ceridian-UCLA Pulse of Commerce IndexTM fell 0.1% in July after an increase in June of nearly 1.0%. This news arrived just at the stock market was -- in Leamer's word -- "plummeting." He also mentioned Floyd Norris' New York Times column, in which the author wondered if the U.S. was already in a recession. At the :35 second mark, Leamer responds:
"The Pulse of Commerce does not indicate at all that we are in a recession."
He then notes that while the Pulse of Commerce is flat, it looks nothing like it did during the last recession, when the trend line appears to track a ball rolling off a table.
Be sure to watch all of these (short) videos to get the full picture of what Anderson faculty had to say.
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