Monday, July 14, 2008

A Comment on 1987

Here is a short addendum to the last post which was a reply to Tom.

I was trading S&P's back in 1987. I remember the crash very clearly. On Friday October 16 I told my clients that the worst was yet to come, but of course I did not anticipate the crash that developed on Monday, October 19.

However my bearish assessment then was based on the simple fact that the market had been going down without any push from negative news. Indeed, after the crash many commentators observed that there was no news that would have justified such a big drop in so short a time.

The situation now is completely different.  The market has been going down but it has been pushed by an unrelenting stream of bad news. This is not the stuff of an imminent crash. The news has been baked into prices already. Something much worse than is already known or anticipated would have to happen to drop this market a lot  from here. 

5 comments:

The Operator (Tim) said...

we are on the verge of financial Armageddon... how do you price that in? banks just trade a point or 2 above zero... does anyone have a model to show me how business works when banks fail left and right and mass hysteria sets in? I'm working on building that model now... too many unknowns

Anonymous said...

Or alternatively, perhaps the market (read market = people) may "capitulate" without actual prices crashing.

- Ivan said...

something much worse is about to happen- airlines, homebuilders, and banks to name a few places are going out of business.

i'm guessing that News is even more proliferated now than it ever has been before thanks to the advancements in communications over the past 15 years or so. perhaps there is just too much 'News' out there so it seems like it's all around us.

honestly, I don't see what is going on that is good in our economy right now, or what would make ppl want to even invest in the Stock Market these days. most ppl I know are putting their extra money in savings and preparing for worse times ahead.

and a good THANKS to the jackasses running our country for 8 years. I'll be shorting on any strength, Carl. good luck, I'm sure we are due for a bounce, but for what?

Ivan

Anonymous said...

Market moves in a cycle motion.
1987 was what happens sometimes in cycles: a "freaky move". Some kind of chaotic behavior that cycle analyst usually take off their studies. A bit like chaotic behaviors that are not weighed within linear studies.

Now, the move we are experiencing today is not yet of the scope of the moves experienced during the 2000-2003 bear market.
Therefore, if we are in an official Bear Market, what do we have to worry about. This market is heading south for a year or so; then it will be up again.

The 1550 limit for the SPX is a hard limit for the cycle to break through - But, boy, once done, the thing will shoot up to the sky.

Now, it is said that chaotic behaviors are where truth resides. It would be interesting that Mr. Futia studies the thing and tells us about what he thinks about it.

Anonymous said...

Something worse to happen?

Like Iran dropping a nuke on Israel?