Problems with the Dow

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Why the Dow will end up plunging to 7,000

There are too many financial risks on the horizon that are being dismissed

By Douglas A. McIntyre
24/7 Wall St.
One theory of economics says that any market can return to a point where it has been in the past. The Great Recession was, by some measures as bad as the Great Depression. Unemployment was 3.6 percent in November 1966. It was at 4 percent in December 1999. There is no precedent for zero unemployment, but those two periods came close.

Recent movements in the stock market could repeat themselves as the economy lurches toward another recession. The DJIA fell to just below 6,630 on March 2, 2009. Back in October 2007, 17 months earlier, it briefly traded above 14,000. What happened? The most frequent answer is the recession that lasted from December 2007 until June 2009, a period determined by the National Bureau of Economic Research, caused the collapse. The recession lasted 18 months, which made it the longest of any downturn since World War II.

The DJIA could drop below 7,000 again before the middle of next year, down from 12,000 where it trades now. The market fell over 50 percent last 2008 and 2009. A correction to 7,000 this time would be 42 percent.

to read more, go to: http://www.msnbc.msn.com/id/43564461/ns/business-stocks_and_economy/