The panic we’ve all been waiting for hit like a tsunami yesterday, sending the Dow Industrials into a thousand-point dive, 700 of it occurring in under ten minutes. We’d warned of this just a few days ago when we wrote that the market was “vulnerable to a sudden, even spectacular, selloff.” Yesterday’s selling was indeed so ferocious that it might have gone on for another thousand points if not for Mr. Market’s addiction to round numbers. With the Dow down almost exactly a thousand points, the broad averages turned from their lows like a cattle stampede encountering a wall of fire. We should consider it a warm-up for the real panic that surely lies ahead. Thursday’s hysteria will be just a sound bite by the time it is replayed on the evening news, but when a truly destructive panic finally hits, it will run its course on Main Street as well as Wall Street. Safeway shelves will be stripped bare as quickly as stocks were stripped of value yesterday afternoon, and branch banks will run out of dollars before even a half-dozen customers have had a chance to deplete their accounts. In this scenario, it’s hard to imagine that things would return to hunky-dory the next day. Grocery stores would find it impossible to keep certain crucial items, such as toilet paper and batteries, in stock. The same goes for the banks, which hold but one crucial item in inventory. But what of the stock market? Although the Dow had recouped 650 points of yesterday’s losses by day’s end, even the chirpiest news anchor would not deign to suggest that this warrants a sigh of relief. Anyone who watched the stock market come unraveled on a monitor yesterday could only have been infected with a sense of foreboding. Under the
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