Tuesday, September 30, 2008

History Lesson

Did 1929 crash have to happen? - Oct. 29, 2004 Everyone - in the media anyway - is hung up on the size of the drop in the Dow-Jones Industrial Average. But since the market is at a slightly higher level, it isn't the size of the drop, but the percentage change in the market.
On "Black Monday" in October 1929, the Dow Jones industrial average tumbled 12.8 percent, and the next day, "Black Tuesday," it sank another 11.7 percent. The crash of 1929 took the market down 23 percent in just two days and nearly 30 percent over six days that fall.

Things would get even worse. By July 1932 the market had plummeted almost 90 percent.
That was a major move.

Now consider some more recent history.
In midmorning trading, the Dow Jones industrial average rose 237.19, or 2.29 percent, to 10,602.64 after falling more than 777 points, or nearly 7 percent, Monday to its lowest close in nearly three years. It was the blue chips' largest point drop and 17th largest percentage drop. The percentage decline was far less severe than the 20-plus-percent drops seen in the stock market crash of October 1987
Do you remember the Great Depression of 1988? Neither do I, and I do remember Black Monday, 1987. I never saw so many grown men cry.

And after Black Monday, 1987, the market didn't come back the next day. It took at least a few weeks, and most people who were going to make money (I wasn't in options market betting on the market downturn) didn't make their money until February of 88. But that's another story.

Are things in a bad way? Probably. Has the economy ground to a halt? No.

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