What If?

Tyler Durden's picture

The current rally off the 2009 lows is echoing rather strongly the surge off the 1982 lows and lining up uncomfortably close to the Black Monday Crash that took the S&P 500 down over 20% in 1987. Of course, it's always different this time; but the market's confidence that the Fed has your back and that computers are there to help not hinder leaves us with an uncomfortable feeling of deja vu all over again.

 

Away from the pure chart analog of human emotion, as the fed notes,

The macroeconomic outlook during the months leading up to the crash had become somewhat less certain.

 

Interest rates were rising globally.

 

A growing U.S. trade de?cit and decline in the value of the dollar were leading to concerns about in?ation and..

 

the need for higher interest rates in the U.S. as well.

 

Alan Greenspan assumed the role of Federal Reserve Chairman in August 1987, just a few months before the crash. (new Fed heads are always tested early)

Check, check, check (today), check, and check.

As Time summed up so well the 'coincidences'...

...all panics are essentially made of the same stuff. No matter how much the Street changes, there will always be a tug of war between overconfident traders armed with new hedging mechanisms and the regulators tasked with keeping them in check. Increasingly, humans will struggle with how to deploy computers to make markets more efficient without having those computers hijack the process. And central banks will walk a tightrope between protecting the public from economic calamity and distorting natural market mechanisms.

 

Sure, nobody will ever accuse Wall Street of being overly poetic, but even this industry full of hard-nosed capitalist does, on occasion, rhyme.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
dow jones 20000's picture

dude linking to your blog gets real old real quick

Badabing's picture

That can’t happen anymore they got the numbers fudged.

Soon we’ll be eating simulated food!

derek_vineyard's picture

black monday was an awesome BTFD dip day

eclectic syncretist's picture

Yessir!  Tell you what, there's an awful lot of churn going on right now, and the timing makes it more interesting than usual.  I'm wondering if I shouldn't be thinking about putting out a short on the SPY shortly.

Muddy1's picture

Yeah, BS on this article.  There was a lot of Hoopla about how the market was lining up with 1929, and Jan. 14, or around then the market was going to collapse.  IT DIDN'T.  Here we go again.

Say What Again's picture

Do I need to wait until Oct to go short?

Angelo Misterioso's picture

i bought some Digital Equipment on that crash - remember that firm? everyone loved it & the ceo was a genius..hahah....think i held it for a week...that was a high frequency trade back then!!

VD's picture

Tylerz back then the markets were nowhere as rigged as today....as such 20% is simply not even a true correction here........with the S&P500 way over 2x fundamentals (sans QE).....

moneybots's picture

".as such 20% is simply not even a true correction here......"

 

In 1987 the market crashed 22% in one day.  That does not include the previuous decline from the 1987 peak.

The Venezuelan market was up some 300% last year.  What would be a true correction of that market?  If they keep hyperinflating, it will be up what, another 300% this year?

VD's picture

price discovery is no longer....

RaceToTheBottom's picture

Debased Accounting is doing its part, too.

Reality is for people who cannot handle the stockmarket.

zerozulu's picture

This time it will be different.

zerozulu's picture

China and Russia, never been like this before, ever.

Dr. Engali's picture

Uhmm.. I'm pretty sure that stuff on the store shelves is already simulated food.

wallstreetaposteriori's picture

Never going to happen.... we 3D print S&P points today.... manufactured!

Iam_Silverman's picture

"we 3D print S&P points today.... manufactured!"

Woo Hoo!  Big print for the manufacturing ISM numbers next week.  Bullish!

Two-bits's picture

This blog pimp is working overtime.

Dr. Engali's picture

This account is almost four years old with it's first comment this March. This spammer needs to hit the road.

 

http://www.zerohedge.com/search/user_comments?name=jjsf

Van Halen's picture

There'll be no crash of any kind until the Democrats are either safely in office for the 2014 Fall elections OR they have lost huge and figure a crash then won't matter because the American people will forget by 2016.

Seasmoke's picture

Not If. But When !!

HRamos_3's picture

Bahbullish, because weather.

spastic_colon's picture

maybe someone with the tools should do an investigation as to why the indexes are actually up today with several weighted componenets down heavily......that is where the HFT game is being played...arbing the index weights

eclectic syncretist's picture

back in 1987 "program trading" was the scapegoat for the crash.  Maybe this time around the HFTs will take er' down before they turn out the lights and leave the building.

But in 1987 there was another catalyst for the steep sell-off.  Over the weekend prior James Baker, who I believe was then the Sec. of the Treasury, went on TV playing tough guy and saying he was prepared to "let the dollar go" or drop in value precipitously.  I don't remember how much the dollar dropped, but the market dropped like there was no bottom in sight.

Dr. Venkman's picture

Just an analouge boy in a digital world.

101 years and counting's picture

wow...how many of these analogs have we seen over the years?????

fonzannoon's picture

I don't know why i even bother with this anymore but ZH has got to be at a crossroads right now as the "it's flow, not stock" theory seems to be shown to be the reverse a little moar each day. 

tarsubil's picture

This cannot continue as is. It is like a cocaine addict that has been up for 3 days straight. Sooner or later all the blow in the world won't keep him going.

fonzannoon's picture

That comment has been said once a week on here for 5 years running

Van Halen's picture

"That comment has been said once a week on here for 5 years running"

Agreed. But we're seeing a mass lie on how good things are being perpetuated by a media, banking, entertainment, and political alliance the likes of which we have never seen. I believe that in the past, at least one of those groups would stand up and tell the truth, leading to a harsh dose of sudden reality. But now they're all in on it together. They can keep this thing going a while longer. But when it does crash, it may be the worst ever.

tarsubil's picture

Yeap. It probably will be when we start saying that the market is permanently fixed by the Fed that it will implode. All we have to do is buy the all time high and it is sure to implode.

Spastica Rex's picture

I don't think the cocaine analogy fits.

The makets are abstractions, models whose meanings are evolving (devolving) all the time. The abstractions no longer represent the economic "health" of the greater social body - maybe they never did.

tarsubil's picture

Yeah. The market may simply not be in any form real like a coke head's body is real. Perhaps your comment below better defines the reality. I dunno. I just think a credit collapse has to happen but maybe not.

Dr. Engali's picture

"And central banks will walk a tightrope between protecting the public from economic calamity and distorting market mechanisms?"

 

WTF? These markets are so distorted that there is no going back without economic calamity. Need I remind you that the Spanish bonds are trading at par with U.S treasuries? It doesn't get much more distorted than that.

RaceToTheBottom's picture

When the markets correct and the crash occurs, there will be an overshoot, especially since the "market growth" has been so concentrated among a relatively few players.

The only remaining question is "can a stock market go negative"?

Iam_Silverman's picture

"The only remaining question is "can a stock market go negative"?"

Hmmmm, interesting question.  How about if it were re-worded as such?:

"Can a stock market denominated in $US go negative in comparison to another currency, or a commodity (such as PM's) not priced in $US?"

In that case, I would say definitely maybe, sorta.  How quickly would the other indexes decouple then?

Milton Waddams's picture

https://www.youtube.com/watch?v=XFn1G2goDQw

 

Fast forward to 3:33 -- https://www.youtube.com/watch?v=Lm_4j-_Dnwc

"Steve you mention that Wall Streets tolerance was not unlimited in these economic areas. The old story is with a mule you start hitting him with a two by four to get his attention. Do we have the government's attention?"

 

 

Spastica Rex's picture

The markets will go up indefinitely.

My living standards will go down indefinitely.

I've come to terms with this.

madbraz's picture

Finally a chart used to compare across different times that actually has changes in the vertical axis that have similar degrees of acceleration.

buzzsaw99's picture

if the market was down 20% yellen herself would be down in the pits buying twitter

LostPolarBear's picture

After the circuit breakers kicked in several days in a row, they would just shut down the markets for a few weeks.

 

adr's picture

The correlation is still 1929 with 1999 being the peak. The US entered a depression after the dotcom crash and is still falling deeper into the crack. Over $1 trillion per year in funny money since 1999 has been able to keep the party going, but only for fewer people each year.

In 1999 the average starting salary in my profession with a degree from the school I went to was $65k, now it is $28k. In 1999 I could buy a home in the neighborhood I grew up in fro $200k. Now the homes are $375k even after the 2008 property crash, was over $450k in 2006. Gas was $1.15, milk was $1.75, ground beef was rarely over $2.75lb. The base charge for natural gas was $5 a month, now it is $30. Everything was cheaper, even high speed internet. I paid $25 a month for 1.5mb DSL. Now it is $45 a month for 4MB cable that ha slower average speeds than my old DSL from 1999, thanks Netflix.

$65k in 1999 was a lot of money, and that was just the starting salary. $28k today is living in poverty, you can make double that just going on welfare. If you want a family you can barely make it on $65k.

That is the definition of a depression. Even working you might not be able to make ends meet. The stock market might be a a record high, but if you can't even make your base bill payments, how are you supposed to enjoy it?

WSP's picture

That is "Why" the stock market is at record highs----because via the printing press the criminal off-shore banks have "paid" corporations to screw the middle class by raising prices and reducing wages.

This is all an end game by the criminal off-shore banks that run the world to improverish what little was left of free choice.  Once everyone in Amerika is improverished all we will have left is a global elite---it will be our job to slave away to build their elysium and life extension technologies.  Those of us that get out of line will be terminated.

Welcome to hell!

trader1's picture

that scenario doesn't sound too bad for employment prospects...who would say no to constructing interstellar aircraft and parallel worlds? 

BandGap's picture

Tell you what, too. It was right about the 1999-2000 era that we were sold big time that the stock market was a reflection of the economic times. It was an all-out, fast talking blitz that had everyone all in. The residual of all these bubbles is that people bought into the casinos idea of "winning", even when the games kept taking.

I believe beasts like Fartomolo and Cramer were born from this era. Add in Kudlow and the srest of that gang. The finance channels became entertainment. We placed our bets and watched the outcomes. All telling us that no matter what, if the stock market is doing well things are fine.

Now back to Dancing With the Stars.

WSP's picture

The markets will NEVER go down again.    Our great masters, the criminal off-shore banks that run the world, along with our Kleptocratic criminal friends in government will make sure that the market only goes up, because we like it when the market "goes up".  We don't care why it "goes up", we just want it to "go up".  Why?  Cuz we like it when it "goes up".  Are we stupid, ignorant fools?  Yes.  Are we dumbed down sheeple incapable of reading a balance sheet and financial statement?  Yes.   Does any of it matter?  No. 

The funniest part in all of this is that the dumb people---the ones that do not understand finance and economics get rewareded while those of us who can read a balance sheet and financial statement get punished.  We get punished by being intelligent by understanding the criminal system.  Those who skipped Economics 101 or were sleeping in Finance 101 are laughing all the way to the bank.  IN the "New America" it pays to be dumb---to be a sheeple.  As long as you worship the criminal off-shore banks and their kleptocratic enforcers in government you are rewarded.  Ask no questions, just BUY worthless pieces of stock that is manipulated by all sorts of criminals with fiat pieces of paper that is printed out of thin air. 

You cannot make this shit up---Amerika truly is a dystopian nightmare----extend and pretend and everything will be just fine...any and all problems can be solved with fiat paper and propaganda!

 

trader1's picture

stop complaining and join the "i'm with stupid" party. 

PlusTic's picture

Dude, STOP IT!  It's a MANIPULATION with infinte amounts fo FIAT behind it...it's NEVER gunna stop