19 replies to this topic

[Rogerdodger]

BUT...
Thursday, 10-15-87 down 2.34% (Like today)
Friday 10-16-87 down 5.16%
Monday 10-19-87 down 20.47%

One difference: we are still above the 50 DMA, then we were below and had lost 3 months worth of support.
http://stockcharts.com/c-sc/sc?s=$SPX&p=D&st=1987-07-01&en=1987-10-31&i=p10118622812&a=115275822&r=5595.png

Edited by Rogerdodger, 19 October 2007 - 08:51 PM.

[Jnavin]

And interest rates then were...? And interest rates now are...?

[arbman]

Apparently the slope of the yield curve (TYX:IRX) was the same 1.25! However, the interest rates were generally higher back then and following a different trend. So far, you could say the bond market reacted earlier...

[pdx5]

I have more questions. Was there a sub-prime problem in 1987? Is there one now? Were derivatives in the Trillion dollar magnitude present then? Are they now? Was Al-qaeda strong in 1987? Is it now? Did a 911 style terror attack happen before 1987? How about now? Was US involved in a $400 Billion/year war in 1987? Is it now? I do know that dollar was dropping in 1987. And if I recall Fed had reduced rates ( I am not certain about that).

[Jnavin]

Head for the hills!

[milbank]

I do know that dollar was dropping in 1987. And if I recall
Fed had reduced rates ( I am not certain about that).

Rates had been cut three times before Oct. 19, 1987.

The thing to get about interest rates now versus 1987 is not the percentages themselves but, where they are going. If the Fed brings the Fed rate down further, the dollar, which is already historically low versus other currencies, goes even lower. That raises inflation which means the Fed will have to raise rates IF a low inflation economy is really Bernake's main concern. The cost of oil is going to be inflationary as it is.

If short term rates go down, long term rates go up. Mortgage rates go up, those pre-foreclosure folks can't sell their homes because there are less buyers, more foreclosures, bigger drop in home prices for all, more defaulting CDO's etc., etc.,...well, you get the picture. It goes round and round spreading debt and default exponentially in a spiral of death.

Have a nice day!

Edited by milbank, 19 October 2007 - 10:03 PM.

[fib_1618]

Was there a sub-prime problem in 1987? Is there one now?

There was a building savings and loan problem, as well as insider trading and other security fraud problems (Ivan Boesky) which eventually led to the down fall of Michael Milken and his junk bond fiasco's involving corporate financings and mergers and acquisitions ("takeovers").

Were derivatives in the Trillion dollar magnitude present then?

No, but there was a new fangled thing called "program trading".

Was Al-qaeda strong in 1987?

Well, it was forming at that time. But Iran and Iraq were fighting, and besides the USS Stark being attacked, the Iranians were having scrimmages with the US with oil platforms in the Strait of Hormuz. And let's not forget the Iran-Contra affair and Yasser Arafat.

Did a 911 style terror attack happen before 1987?

Remember the bombing of the barracks in Lebanon in 1983 that killed 300 peace keepers (courtesy of Hezbollah)?

Was US involved in a $400 Billion/year war in 1987?

Yes, it was called the "Cold War", though you can't account for inflation...."Peace through Strength"

I do know that dollar was dropping in 1987. And if I recall Fed had reduced rates

The US Dollar was declining for 2 1/2 years from 1985 and found a temporary bottom with the stock market bottom in December 1987. Alan Greenspan became FED chief in early August of 1987 and promptly raised interest rates to slow the "irrational" stock market advance. In fact, if I remember correctly, we had one or two limit down days in the bond pit right after his appointment which eventually pushed the yield on the 30 year bond to 9 1/4%. The 3 month T-Bill yield moved up from around 6% and kept pushing higher to around 7 1/2% in mid October before the market couldn't take it anymore and crashed. To this day, many believe that AG was the final straw that broke the back of the advance which ended on August 25, and the rest is, as they say, is history. His repeat performance in 1999/2000 proved that economists never do learn from their mistakes.

So, yes, nothing really changes in this play called market analysis, only the players and circumstances.

Fib

[ken29]

Hey Fib, Whats your thoughts on the current market?

[pdx5]

Time to run into the bomb shelter, pack 2 Remington pumps with 10 crates of ammo, stack canned food and water to the ceiling. And don't forget the can opener.

[fib_1618]

Whats your thoughts on the current market?

Check out the transcripts from yesterday.

Fib