Biz Prof Comment

Monday’s five hundred point market decline reminds me of October, 1987 and leads to expect more such down days. I hope so.

The Dow started to head south in September and was down 8.4% from peak. Then the markets rebounded and on October 2nd the Dow was up 5.9% from September 21st. Over the next 7 days the Dow would drop 13.5% from its high on August 25th.

On October 19th, 1987 the market crashed. The Dow dropped 508 points or 22.6% for the day. This was a drop of 36.7% from the record high of 2722.44 on August 25, 1987. The stock market has lost 1/2 trillion dollars of wealth.

It was bloody; weak sister brokerages E.F Hutton and, yes, Lehman Brothers disappeared (into American Express). Gloom & doom prevailed; program traders were the designated culprits.

But it was brief. Despite the rise in interest rates that sparked the near 40%, the broader economy remained expansive, By November the Dow began a 2-year climb that recovered the value---and then embarked on the extraordinary ride of the 1990’s.

So far, the politicos seem to be handling the daily crises and I am pleased they are not doing anything to prop up the bogus securities cooked up between Lehman and AIG. Off with their head! And let’s get back to the party.