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Ron

Interesting perspective on the worst day ever for the stock market

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Were you investing in stocks 30 years ago?  
 
Below comment is extracted from Eddie Elfenbein's weekly email:
 
October 13, 2017
 
“In business, competition is never as healthy as total domination.” – Peter Lynch

This Thursday will mark the 30th anniversary of the 1987 market crash, or “Meltdown Monday” as it’s come to be known. On October 19, 1987, the Dow plunged 508 points. In percentage terms, this was a loss of 22.61%. In today’s terms, that would be like a loss of more than 5,000 points!

Three decades later, the 1987 crash sill ranks as the biggest one-day percentage loss in history. It’s nearly double the second-biggest loss, which came in October 1929. With the modern “circuit breakers,” this record may never be broken. If the S&P 500 falls by 20% nowadays, the exchanges shut down for the day.

I often hear stock market “experts” predicting that another 1987 is about to come our way. I always think to myself, “oh, so you’re predicting another 1,000% return over the next 30 years.” Yes, that’s what the Wilshire 5000 did measuring from the market close on the day of the crash. And if we include dividends, then the index is up more than 2,000%. The fact is that the 1987 panic was a great time to buy.

 

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2 hours ago, Ron said:
Were you investing in stocks 30 years ago?  
 
Below comment is extracted from Eddie Elfenbein's weekly email:
 
October 13, 2017
 
“In business, competition is never as healthy as total domination.” – Peter Lynch

This Thursday will mark the 30th anniversary of the 1987 market crash, or “Meltdown Monday” as it’s come to be known. On October 19, 1987, the Dow plunged 508 points. In percentage terms, this was a loss of 22.61%. In today’s terms, that would be like a loss of more than 5,000 points!

Three decades later, the 1987 crash sill ranks as the biggest one-day percentage loss in history. It’s nearly double the second-biggest loss, which came in October 1929. With the modern “circuit breakers,” this record may never be broken. If the S&P 500 falls by 20% nowadays, the exchanges shut down for the day.

I often hear stock market “experts” predicting that another 1987 is about to come our way. I always think to myself, “oh, so you’re predicting another 1,000% return over the next 30 years.” Yes, that’s what the Wilshire 5000 did measuring from the market close on the day of the crash. And if we include dividends, then the index is up more than 2,000%. The fact is that the 1987 panic was a great time to buy.

 

Just like it was a very good time to buy in 2008-2009.  If you had 15-20 years to retirement and has some investments in fixed income securities, moving some percentage of that to a stock mutual fund, or a Total Stock Market fund would have been a good move. 

Instead, a goodly percentage of people with savings for retirement did the opposite.  They moved what they had left into fixed investments, there by loosing the opportunity to recoup their losses.

Edited by Al F

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A little while back, I posted that I am selling stocks to get to a 50/50 split. If the market dropped even 10 or 20 percent I would sell all my bond funds within a week and buy stocks until I was at 100percent. 

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I was a investment advisor in 1989. Many clients called me that day and I told them "When do you buy a suit at Nordstrom? When they are on sale. Today is the time to buy    Stocks are on sale" 

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4 hours ago, Twotoes said:

I was a investment advisor in 1989. Many clients called me that day and I told them "When do you buy a suit at Nordstrom? When they are on sale. Today is the time to buy    Stocks are on sale" 

How many of your clients took your advice - how many lost their "nerve" and sold near the bottom?

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On 10/14/2017 at 4:46 PM, Twotoes said:

I was a investment advisor in 1989. Many clients called me that day and I told them "When do you buy a suit at Nordstrom? When they are on sale. Today is the time to buy    Stocks are on sale" 

Good advice!

And yet look at the people rushing into the "Dow store" today to buy their "suits" at the highest price ever seen.  Makes you wonder.

Of course, the folks selling those "Dow suits" today may be getting the last laugh, eh?

Edited by KandJBm
incomplete.

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On 10/13/2017 at 2:56 PM, Ron said:
Were you investing in stocks 30 years ago?  
 
 

I started investing in 1985 and when the fall of 87 came around I was like the proverbial "deer in the headlights".  I was shocked.  But it was very interesting and quite a learning experience. 

 

Jim

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The circuit breakers are being removed at a pace never before seen. An example is the "Bail-In" legislation so our assets in any bank can be seized as their own. Another sobering metric is that the FDIC insurance, in a bank failure like 2008, would not be able to save our deposits because of "Bail-In."

The FDIC cannot cope with a massive amount of failures like 2008/9 without going to the federal government.

The next one will be a learning experience for us all.

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