Black MondayOctober 23, 2007
Mark on the markets
Black Monday
October 19 1987, the DOW JONES Average lost over 500 points in a day that left investors and traders wondering if the exchanges that trade stocks would be able to open again, and if they could even exist anymore. Futures exchanges that traded the S+P 500 contract had to get a 400 million dollar loan, from their bank to open Tuesday, the 19th.
Friday, October 19, 2007 the DOW closed down 366 points and few noticed.
In 1987 a 500 point loss would be equivalent to a 3000 point loss in today’s DOW.
In 1987 the Dow was trading at 2700, in 2007 the DOW trades around 14,000.
One of the biggest differences between the 1987 markets and the 2007 markets are the availability and viability of global markets.
In 1987 a typical stock portfolio might include IBM, GE, and Campbell soup, Phillip Morris and Proctor + Gambel.
Today’s portfolio might include BHP Billiton, China Petroleum, RioTinto, Bayer, and Dryships.
The obvious difference is that the portfolio of today has a global makeup of companies from all over the world and they represent different asset classes. This is what you want for real diversification in a growth oriented portfolio.
For the sake of comparison I named individual stocks from around the world, however diversification can be found by using Exchange Traded Fund’s that trade on our U.S. exchanges that contain these companies from various countries and asset classes.
The correction in 1987 was all based on U.S. concerns and economics. A correction of any real significance will probably be triggered by an event that is made up of global concerns that will have global ramifications.
Markets that trade Equities and Futures contracts are much more Liquid and accessible than in 1987. Massive volumes of stock or derivatives can be traded from a remote location electronically, thus making the Exchanges less important. An argument could be made; are global markets more or less vulnerable to market crashes and recoveries?
Mark Patterson is a registered investment advisor with MHP Asset Management LLC, and can be reached at 447-1978 or Mark@MHP-Asset.com
MHP Asset Management, LLC
P.O. Box 460, Conway, NH 03818
Phone: 603-447-1979 Fax: 603-941-0904 |
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