Stocks, Gas, And Everything

Dear John Mellencamp,
Although the "wild night" may in fact be calling, I guarantee there are no boys doing the boogie woogie on the corner of the street.

In more important news, SELL SELL SELL!

Just kidding, but the NYSE is taking a scary nose-dive again today, trying to keep up with the falling foreign markets. The interesting thing about this dive is that it is predictable. Well, sort of.
The Hindenburg Omen, a weird sort of statistical anomaly that 92% of the time is right every time allows for the prediction of a coming (read: within days) correction in the stock market. The Hindenburg Omen has been right almost every time since 1985, and accurately predicted today's plunge, based on Friday's market.

The two problems I have with this is that the ability to predict market drops (between 2%-4.9%) is really neat trick, but if you can do so, 1. you run the risk of being a self-fulfilling prophecy, and 2. why can't you predict upswings in the market. Sell-offs by and large make no one profit (especially with the government blocking short-sales) and the best you can do is protect yourself from losses. A 92% accurate model for sudden upticks in the market would be a much more useful tool.

Further, the drop today of the Dow below 10,000, and the price of a barrel of gas below $90 reminds me of two things that happened 8 months ago.
First, I read an article that claimed that presidential election cycles tend to sway the stock market, the time of highest volatility in the last 52 years' election was the two quarters immediately before and the one quarter after a Presidential election. Also, the market typically swung downward for the first 18 months of an President's term, swung up for the next 26 months, then swung back down before the next election. Sure enough, the recent market volatility follows that trend. So does that mean we have another 18 months before the market swings upwards? Most economists think so.
Second, a different economist (Harry Dent) predicted we'd hit 20,000 by the end of 2008. I wish I could find that article (found it) so I could point out what a ridiculous prediction (on the level of Nostradamus) it was.
Third, it was predicted in August that "we'll never see $3 dollar gas again." This morning at the local Quiktrip gas costs $2.99 for regular unleaded. In Joplin this morning gas is at $2.81.

The point I'm trying to make here is that for every situation, there is some "guru" who is happy to make a bold prediction, whether optimistic or cynical. And then they hope they are right and if they are wrong they try to bury it by making newer predictions.

So here is the official TAE bold prediction for the economy:
The stock market will drop to around 9400 by February 2009, before starting a slow climb back above 11,000 over the next year. Rises and falls of 500 points will become more commonplace to the point that 300 pt changes will no longer be newsworthy. A barrel of gas will stabilize at 88 dollars a barrel, and the price of gas at the pump will lower until the national average is $2.75 a gallon for regular unleaded. I'll try to revisit this prediction in 6 months, at which time if I'm correct I will cite it heavily, and if I'm wrong I'll just make new predictions and bury this entry.