Yesterday, the Dow Jones industrial average notched up a gain of more than 330 points. All the major indexes had gains approaching 3 percent.

Apparently, the main reason for such dizzying optimism was the Fed’s decision not to hike rates. That and crude oil’s drop to $118 a barrel.

But taken altogether, guess how much money the Dow stocks are making? Bill Bonner in The Daily Reckoning says if you put them all together you’d have a loss of more than $80 billion. And the last time there was such a loss in the Dow was 75 years ago – in the Great Depression. More from Bill…

This is an encouraging word to many observers. They note that the last time Dow earnings went negative proved to be a very good time to buy stocks. After ‘32, stocks in the United States went up 373%.

But wait, they went up AFTER having lost about 85%. The Dow in ‘32 rose from a low of 41…with stocks trading at only 5 to 8 times trailing earnings (in terms of current negative earnings, the P/Es were meaningless). In other words, the stock-market had been crushed before it rose again.

Today’s stock-market has not yet been crushed. In fact, the Dow itself is only a bit lower than its all-time high.

The correction has taken the wind out of Wall Street’s sales. But, so far, it has done very limited damage to U.S. stocks. Most likely, more pain lies ahead…before another upswing.

Hey, don’t take our word for it. No less an authority than Alan Greenspan himself says there is more suffering ahead…and there is no less an authority than Alan Greenspan.

The auto business is being corrected – severely. One of the biggest losers on the Dow was – no surprise – General Motors. It lost $11 a share in the second quarter- which is almost unbelievable, for a share that sells for $10. And Chrysler’s latest attempt to raise money fell $6 billion short. The auto industry will probably go broke – and be nationalized, like housing.

Source: The Wind from Wall Street’s Sails