Your zombie economic forecast

Given that we just suffered through another 500 point drop in the Dow I thought that I should provide my view on the current state of the economy. As I do have an MBA in Finance I do possess at least a little background on the subject at hand. However, it should be noted that I am also a person who willingly paid money to see Weird Al Yankovic in concert and therefore my judgment cannot be trusted in even the best of circumstances. Here it goes, in handy question and answer format.

Q: So how bad is it?
A: Bad. Really bad. Guy coming after you wearing a hockey mask and a chainsaw bad.
Q: Eep! So what the hell is going on?
A: Let’s try to keep it simple. When you put money in the bank the bank doesn’t actually hold on to it. They lend it to people who then use it and promise to pay it back. As long as they do there is no problem. Except that now we lent to a lot of people who didn’t pay the banks back. And the banks invested in all of these strange financial instruments that were meant to reduce risk but in fact just made the risk larger. Now several banks are failing because they can’t cover what they owe while the others aren’t lending out money to anyone.
Q: So, what’s wrong with banks not lending?
A: Well, see, companies don’t actually carry cash. Whenever they need to do something (up to and including make payroll) they typically do it through a loan. Now they can’t do that so everything is seizing up. Hence, a huge downturn in the market until the credit market opens up again.
Q: What is your next to worst case scenario?
A: Dow drops to 7777 over the next several months and you have double digit unemployment (I’ll guess 12%).
Q: Why 7777? That is a rather precise figure.
A: 7777 is the next major psychological barrier for the Dow now that we have broken 10,000. Despite the fact that the number is rather meaningless people really do react to it. That’s why on Monday the market rebounded back to 10,000. They felt safe around that number. With that level gone the next safe zone is 7777, which exists because people really like the number seven. I’m not making that up. There is actually research that agrees with me.
Q: Ok, so what is your worst case scenario?
A: Complete collapse of the global economic system resulting in worldwide anarchy. However, for those of you who have heeded my advice and have prepared for the inevitable war against the zombies you will find that the plans that you have developed for that conflict will serve you well in such a situation. And no, I will not tell you where my secret hideout is. When the zombies rise we are all on our own.
Q: Wait a minute, as your ex-girlfriend won’t you come and rescue me when I call upon you for help while surrounded by zombies?
A: Ha ha. No. As anyone well versed in zombie defense tactics knows one of the first actions to be taken by any female with a known former male suitor who also happens to be a hopeless romantic is to call on said suitor for rescue. In the best case scenario, he will draw the zombies away from your position and provide a useful diversion as you escape. In the worst case scenario, he actually will rescue you and then you will have to patiently accept his company until such a time arises in which he can properly be utilized as zombie bait. Unless you are by my side when a Class 3 outbreak occurs you are out of luck.
Q: You really have put a lot of thought into this whole zombie scenario, haven’t you?
A: I keep a machete at the ready at all times. Blades don’t need reloading.
Q: Anyway, back to the market. Any suggestions?
A: If you’re my age keep plugging away at your 401K. Yes, you’ve lost a ton of money but that is money meant for thirty years from now. If the market doesn’t recover by then we will seriously be at the point where foraging for food will take precedence over retirement plans. I’d stay away from any company where they will need a lot of capital in order to start making money (sorry tech startups) until the debt markets open up. Always side on companies that make products that people have to use. People will need to buy diapers and razor blades. Otherwise, try to keep a good store of cash at the ready, have your resume up to date and start networking just in case.
Q: Ever seen the market this bad?
A: Nope. I’ve been following the market for 25 years (really, I have had my eye on it since I was 10) and I’ve never seen a configuration of events like this. The Dow is down over 30% in the past year. But, there are actually some positive signs. The whole world economy is hitting a recession and that means everyone is in the same boat and that provides opportunities for the first people to figure out a fix, which will most likely be the U.S. Plus, when people around the world get scared the money goes into the U.S. market because even in horrible times we are still the safest bet. The dollar is strengthening and the very weak dollar that we’ve had worried me more than anything. Oil prices are down and that should help provide at least a modicum of stability to the whole state of affairs. We haven’t bottomed out yet but at least I can see some positive signs out there.
Q: Still happy that you got a job when you did?
A: Yep. Might turn out to be the luckiest moment of my life. I’ll take employed in Delaware over unemployed in Kansas City any day of the week.

Off to watch the debate. Be vigilant! If anyone lurches towards you always ask yourself “Is that a zombie?” If in doubt, aim for the head. Better safe than undead I always say.