87 crash

Discussion in 'Economics' started by capitalMan, Jan 6, 2004.

  1. does anybody smell something 's wrong???

    I wasn't trading during 87, but from what I understand, there are strong similarities in current condtions at this very moment ...it's not the same in many ways, but I think some of us can feel that tension, something is simply not right..a fundamental regime shift going on in the markets now..

    1) a over-extended market without jusitfied fundamentals

    2) a dollar that is going to hell

    3) interest rates that can't go any lower...

    NONE of these three conditions is a stable variable, and they are certainly not going to last forever..something has got to give..

    To stop the dollar plunge, greenspan has to increase interest rates, and that will spell death for the stock market..

    if interest rates remain at this level or even go lower, america's creditor(japan and china) ain't going to watch their dollar denominated asset goto hell, a asset reallocation from them would also cause a crash .

    EVEN if both scenerio above don't happen, the uptrend is just not sustainable at this rate..and once that momentum is over, the rush to get out ain't going to be pretty..

    are we going to see a 87 crash in 04?
  2. TD80


    I think there are definitely some similarities, I'm not quite sure that the derivatives issues present in the 87 crash are in place, but I will say I am absolutely shocked at the margin rates the market is currently displaying. It is much higher than even the top of the bubble in 2000.

    I'm not so sure "crash" is an appropriate word, but I think it's possible we could see a severe downturn if earnings do not start to catch up / currency problems / interest rate hike / other catalyst.
  3. I'll make a controversial statement here. While it is highly likely that we will see an orderly decline, we will not see a crash anymore due to the proliferation of hedge funds. Reason being is that the market has much more 2-way action due to hedge funds (longs and shorts) which will buffer the market on the way down with shorts looking to cover positions. Back in '87 there was relatively no significant short position (or 2-way action) in the marketplace and hence things fed on themselves. This is why i really can't understand why some countries frown upon short-selling in their markets. It creates a dampening of volatility by creating natural buyers on selloffs. Just my 2c.
  4. well..the hedge funds was also around in 98 or 2000 or 911

    but the market still crashed, although not on a 87 scale..

    a crash like 87 is going to happen sonner or later, it's in the probability distirbution so it's just a matter of time b4 it does,
    and I am saying it's 04 because the catalyst is all lined up..
  5. Well, I wasn't in the market in '87 but if I'm not mistaken the selloff on Black Monday was triggered in part to some comments by a fed or treasury offical over the preceding weekend ....

    Now while underlying conditions may be in place to allow a steep and sudden fall along the lines of '87, I strongly suspect the Fed, Admin, and Treasury officials have gone to school on the '87 event and have protocols in place to better facilitate keeping their mouths shut on the weekends.

    Can you imagine the Sec. of the Treasury getting drunk at a hedge fund convention this weekend and blabbering about 'Well, the US is already essentially bankrupt, but our ace in the whole is our ability to produce an infinite amount of currency on the market, thereby debasing our debt to a reasonable level ....

    Something like that might do it. :eek:
  6. I consider the 98, 2000 and 9-11 declines quite orderly. Nonetheless, I'm in agreement with you in spirit. The market is heading for a problem IMHO.
  7. Yes, a crash is in the cards - but when will it happen? Like in 1987: When the dollars gets out of control.
  8. the dolloar is already out of control!!!

    euro at 1.275..wow...

    I am glad I am not holding any $USD ..:)

    I have to agree with bluehorseshoe, it's probably not going to some bigmouth's fault this time, they are all sticking to the "strong dollar, low interest rate" talk, (how contradictory this is this???)but anybody who has looked at the chart know how strong the dollar is. My point is that whatever the catalyst, the conditions are that the crash is going to be on a scale of the 87 crash...

    two mouth ago, when japan and Hong kong crashed 600 points in a day, I thought that was IT, it always starts in Asia (87, 98)
    but of course, it never came...

    all I am saying is ..keep your heads up..don't believe the hype...
  9. Yes, US market - economy will fail soon.
    There is coming president election this year, and US citizen will vote to Bush stupidly. He will keep doing his job.
    What he or his pal does now is so-called voodoo economics. I will not hold US stocks or USD.
  10. quote from mg financial...

    "Recall that an orderly decline in the dollar turned ugly was the very backdrop in 1987. Only this time the US is the world's largest debtor nation, not a net creditor, which means the downturn could be worse as it requires $2 billion in foreign financing a day. In the near term US deficits may continue to be funded by Asian central banks, but it may eventually take a sharp rise in bond yields (wanted or not) to stop the dollar's decline."

    all doom and gloom eh?
    #10     Jan 6, 2004