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Black Monday, How it Compares to Today’s Economy, From an Insider

10.15.2008 · Posted in Finance Articles

My wife, Susie, and I were walking on the beach this weekend and the subject of “Black Monday” came up. All of a sudden I was thinking back to what had happened to cause such a precipitous drop in the stock market. Whatever it was I remember feeling good about the fact that we all went through, learned from it, recovered, and actually things were much better for an extended period of time because of it.nnI guess you could say that Black Monday actually started on Friday October 16, 1987. On that day the Dow Jones Industrial Average dropped 100 plus points. Now by today’s standards that’s considered a drop in the proverbial bucket. At the time however, with the Dow poised at 2,200, that was enough to have people talking all weekend about the stock market.nnI can very easily recall thinking that when Monday morning came, the market would rebound and all of the fear and doubt would disappear. I was wrong about that prediction. It seems that with all of the talk over the weekend, the fear had just been heightened. Everyone everywhere was talking about the market, and most of them very fearfully.nnIt seemed forever until Monday morning arrived. Looking back, the first 100 point day on Wall Street had come in August 1982. The stock market had been over 1,000 in the 1970’s but retreated and due to a long recession hadn’t been above again until ’82. From there it more than doubled in a little over five years. Not a bad return. As stock brokers, we all had a right to be a little optimistic. nnWell, as history has recorded, that isn’t what happened. In less than an hour after the opening bell, the market was down another 100 points. That was only the start as the Dow lost 500 plus points on Monday, October 19, 1987. The day has been referred to as “Black Monday” ever since. Think of it, people’s portfolios had lost over 25% in just two days of trading. nnThere were changes as a result of those days in October of 1987. These were changes which were designed to prevent such a thing from happening again. And now we have today’s crisis. What happened between then and now?nnBy the spring of 1988, the markets were more calm and climbing once again. It wouldn’t be long before the Dow was closing back above 2,000 again. Some regulatory changes had increased everyone’s confidence and order, once again, had returned to the financial markets. Then things started to change. nnThere has been dramatically increasing greed on Wall Street, and regulations have been loosened. Also, we have a dollar which has lost value and real estate values which dropped off more than a year ago haven’t even started to rise. In addition, we have foreclosures at all time highs. On top of all of this, we are now handed a $700,000,000,000.00 bail out which we are told we must accept in order to keep the economy rolling. In essence it seems its a tab that the general public is being handed to cover the cost of corporate America’s excesses and failures as well as regulator’s loose handling of the economy for an extended period of time.nnAlthough the Federal Government doesn’t like to mention it, we are in a recession. I also feel that we are going to see the situation reaching more and more households. We may also see more bank failures, job losses, and more foreclosures. With more and more dollars circulating almost on a daily basis, your purchasing power is declining steadily as well. nnIn closing I have two questions. First, have you seen this coming for a long time? And even more importantly, what are you doing now, right now today, to secure your and your family’s financial tomorrow?

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