Roller Coaster Markets
John D. Penn
Haynes and Boone, LLP
Fort Worth, Texas

We’ve all ridden on roller coasters. They go up and down rather swiftly. They lurch to the left and right with little warning. When you’re on one, you know that it will be anything but dull.

The stock market has become one of the wildest roller coaster rides in recent memory. The Dow Jones Industrial Average has passed through 13,000 and 14,000 at many times since March. In October and November, the average shed 1,000 points in thirty days. It dropped into the 12,000s again just last week. In the mean time, it goes left and then right for days at a time with little upward or downward movement. Along the way, there are unforeseen bumps, dips, twists and turns that keep life interesting in that rather wide range between 13,000 and 14,000.

In some respects, the markets are responding to the news. There is no doubt that uncertainties have been injected into the process from many different directions. Major brokerage companies fired their CEOs for failing to manage the exposure in the debt markets. There is uncertainty about which direction and how far interest rates will move. Currency exchange rates have our dollar lower than it has been in recent memory. Stories about foreclosure rates have many wondering if their friends (or perhaps more importantly, their neighbors) will be able to keep dream homes that have turned into money pit nightmares.

At least we have the holidays ahead to lift our spirits. That works until we read about retailers predicting poor holiday sales in the face of higher fuel prices and lower exchange rates. Merchants, already facing challenges, wonder if consumers will show up and if they do, will people bring their checkbooks or hold off to await discounting season. Some retailers are already filing for bankruptcy before the holiday season is underway.

If these weren’t enough, the 2008 election season starts in earnest all too soon. It is hard to believe that the first contest of 2008 occurs before the last college bowl game is played. For the first time in recent memory, neither the president nor sitting vice president are on the ballot. It has been so long since this last occurred, no one is sure how it will come out.

The overall economy, having had a long string of consecutive quarters posting of growth, faces the reality that the string cannot go on indefinitely. The question is when will it turn and how far down will it go?

Strangely, this situation starts to resemble 2000 in many respects. That, too, was an election year. The markets have had a long string of advances. Signs of slowdown and uncertainty are all around. We recall that the slowdown starting to be felt in 2000 began a string of banner years in the restructuring world. Large cases, small cases, even short and tall cases were being filed around the country. There was never a shortage of things to work on back then. Those were the days when losses in our 401(k)s became gains in our checking accounts.

We can hope that the markets are on a roller coaster in yet one more way. A roller coaster’s track is a loop. Once a ride ends, it begins yet again. We have all seen how history – like a roller coaster – repeats itself. If that’s true this time around, another big drop is just around the corner and bankruptcy professionals’ days of being tanned and rested will be ending soon.

John D. Penn is a partner at Haynes and Boone LLP in Ft. Worth, Texas, and the immediate past-president of the American Bankruptcy Institute. He is board-certified in business bankruptcy law by both the Texas Board of Legal Specialization and the American Board of Certification. Mr. Penn received his B.B.A. from Baylor University and his J.D. from the Baylor University School of Law.