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
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
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
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.