Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 9/1)

Editor’s Note: Liz Peek is a financial columnist. 

Before I get into this week’s Wall Street wrap, let me tell you about a piece on the counterfeiting industry that I am working on, inspired by the "Fakes Are Never in Fashion" campaign of Harper’s Bazaar and by a trip to the Silk Market in Beijing.

In that bustling, noisy marketplace nearly every kind of clothing and accessory is for sale – much of it extremely good replicas of well-known brands – at huge discounts from the original. Whispered invitations to view "the real thing" led to a visit some 100 yards away to a squalid walk-up, where I was shown very convincing knock-offs of every brand of handbag you could think of. All this taking place under the noses of the Chinese government, which of course has promised to stamp it out.

I mention this because I’ve learned a lot from talking to Valerie Salembier, the publisher of Harper’s, who initiated the magazine’s anti-counterfeiting efforts. 

In a nutshell, there is hard proof that these manufacturers of fakes finance terrorism – for example the train bombings in Madrid some years ago – and employ the harshest of child labor practices — chaining young children to machines and forcing them to sleep on wet factory floors. This may sound melodramatic, but the more I hear from people like Valerie, who works closely with the New York Police Department, or the folks at Eastman Kodak who are creating technologies to combat the practice, the more I want to tell women across the country to join the crusade against these counterfeiters.

It is, of course, not just handbags being duplicated. Some 10% of pharmaceuticals are fakes, 35% of the software installed in computers that we buy and 2% of airline parts – airline parts! These subpar products are not only cheap – they are dangerous. Think exploding batteries, tainted drugs and poisoned pet food – the list goes on. In the aftermath of the collision that caused the fatal Concorde crash in France, authorities found a part on the tarmac that apparently caused the tragedy – it was a counterfeit unit. We should all think about that before buying the almost-perfect Louis Vuitton handbags sold in the Silk Market – or on Canal Street.

And now to Wall Street.

Yikes – the market was hammered yesterday (Dow Jones down 344 points), presumably in response to signs of a weakening jobs picture. Unemployment claims for last week totaled 444,000, up from the prior week and at a level consistent with a recession. After four consecutive down days, the S&P 500 is 20% below last year’s top.

Market watchers are waiting to see if the summer lows will be retested. At July’s nadir stocks had fallen slightly less than 25% from the peak last year, about in line with the average sell-off during post-World War II slumps. (Actually, the average is a little over 30%, but if you exclude the tech collapse at the beginning of this decade the drop is about 25%. Because stocks were so crazily inflated during the tech boom, that pull-back is considered an anomaly.)

The averages will likely take a drubbing again today because of a report this morning that August unemployment rose to 6.1% – the  highest in 4 ½ years. Nervousness about jobs is at the heart of investors’ most profound concerns about the direction and underpinnings of the economy. And, rightly so.

Though we have added some 8 million jobs during this decade, employment has not kept pace with overall growth. Worker pay has suffered as employment has increased in lower-paid occupations such as teaching and health care and declined in manufacturing.