{"id":16196,"date":"2017-10-22T12:13:03","date_gmt":"2017-10-22T16:13:03","guid":{"rendered":"http:\/\/www.pgmcapital.com\/?p=16196"},"modified":"2017-10-22T20:35:27","modified_gmt":"2017-10-23T00:35:27","slug":"the-30th-anniversary-of-the-crash-of-october-1987","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/the-30th-anniversary-of-the-crash-of-october-1987\/","title":{"rendered":"The 30th anniversary of the Crash of October 1987"},"content":{"rendered":"<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Dear PGM Capital Blog readers,<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Thursday October 19th, marked the 30th anniversary of the 1987 \u201cBlack Monday\u201d\u00a0when\u00a0stock markets\u00a0around the world\u00a0crashed, shedding a huge\u00a0value\u00a0in a very short time.<\/p>\n<h3 class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">INTRODUCTION:<\/h3>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">The market crash of Monday, October 19, 1987, began in\u00a0Hong Kong\u00a0and spread west to Europe, hitting the United States after other markets had already declined by a significant margin. The\u00a0Dow Jones Industrial Average\u00a0(DJIA) fell exactly 508 points to 1,738.74 (22.61%). In Australia and New Zealand, the 1987 crash is also referred to as &#8220;<b>Black Tuesday<\/b>&#8221; because of the time zone difference.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\"><iframe loading=\"lazy\" src=\"https:\/\/video-api.wsj.com\/api-video\/player\/v3\/iframe.html?guid=A5BC09AA-4010-481E-9076-77ECEBFDB25B&amp;shareDomain=null\" width=\"640\" height=\"360\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Below chart of the DOW Jones Industrial and the S&amp;P-500 of 1987, gives a clear picture of the October 87 market crash.<\/p>\n<p><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-16210\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api-300x140.png\" alt=\"\" width=\"500\" height=\"233\" srcset=\"https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api-300x140.png 300w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api-768x358.png 768w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api-1024x478.png 1024w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/api.png 1200w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><\/p>\n<h3 class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">PGM CAPITAL ANALYSIS &amp; COMMENTS:<\/h3>\n<h3 class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\"><\/h3>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">This anniversary, naturally,\u00a0has brought about a number of discussions\u00a0on whether another crash could happen and if markets are prepared for the possibility. And with stocks near the high end of their historical valuation range, some investors are concerned that a \u201cstretched\u201d stock market could see investors feel en masse amid a panic. High valuations, however, were not really a dominant feature of the markets in 1987<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\"><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-16199\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d-300x199.jpg\" alt=\"\" width=\"500\" height=\"332\" srcset=\"https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d-300x199.jpg 300w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d-768x510.jpg 768w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d-750x500.jpg 750w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/b51e64ddf5bbcf14fcc6ac589e5ea89d.jpg 800w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">The market\u2019s Case Shiller price\/earnings ratio \u2014 which captures roughly how much investors are willing to pay for $1 of earnings per share using a 10-year rolling average \u2014 was right around its historical average ahead of \u201cBlack Monday\u201d, as can be seen from below chart.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\"><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/32c3ffcd134730430ebefe2a0de1744f.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-16201\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/32c3ffcd134730430ebefe2a0de1744f-300x161.png\" alt=\"\" width=\"500\" height=\"269\" srcset=\"https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/32c3ffcd134730430ebefe2a0de1744f-300x161.png 300w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/32c3ffcd134730430ebefe2a0de1744f-768x413.png 768w, https:\/\/www.pgmcapital.com\/wp-content\/uploads\/2017\/10\/32c3ffcd134730430ebefe2a0de1744f.png 800w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Above chart shows also that right now, stocks have only been more expensive ahead of the 1929 market crash and during the tech bubble.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Most analysts, have pointed out, that the current historically low level of interest rates is supporting the market\u2019s valuation and on a relative basis makes stocks look more attractive than a price-to-earnings multiple might otherwise appear. And in any case it is not the price of stocks that makes markets crash \u2014 it is fear.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">For\u00a0technical reasons, an exact repeat of the crash cannot happen; new rules in the stock market make a 22% daily drop in the Dow Jones Industrial Average an impossibility.\u00a0But as Nobel Prize-winning economist Robert Shiller\u00a0notes in The New York Times on Thursday, this does not mean that panics have been removed from markets or society.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Shiller also notes that his research immediately after the crash in \u201987 that, \u201ca powerful feedback loop from human to human \u2014 not computer to computer \u2014 set the market spinning.\u201d It was not one bad earnings report, or one bad data point, or anything happening outside of the market itself.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Since 1987, markets have continued to show that they are fully capable of gripping participants in panics.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\"><iframe loading=\"lazy\" src=\"https:\/\/finance.yahoo.com\/video\/30th-anniversary-1987-crash-then-142035511.html?format=embed\" width=\"640\" height=\"360\" frameborder=\"0\" scrolling=\"no\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Questions about whether another crash like 1987 can happen have a clear answer \u2014 of course it can. But we won\u2019t know when it\u2019s coming, and even decades later we might not have a clear picture of why.<\/p>\n<p class=\"canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm\">Investors should keep in mind that the current valuations of the stock markets are only justified, by the current historical low interest rate, which mean, that at current valuation, higher interest rates might be a time bomb under the markets.<\/p>\n<p>Yours sincerely,<\/p>\n<p><a href=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14\" src=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg\" sizes=\"auto, (max-width: 112px) 100vw, 112px\" srcset=\"http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric.jpg 160w, http:\/\/www.pgmcapital.com\/wp-content\/uploads\/2015\/06\/eric-150x150.jpg 150w\" alt=\"\" width=\"112\" height=\"112\" \/><\/a><\/p>\n<p>Eric Panneflek<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dear PGM Capital Blog readers, Thursday October 19th, marked the 30th anniversary of the 1987 \u201cBlack Monday\u201d\u00a0when\u00a0stock markets\u00a0around the world\u00a0crashed, shedding a huge\u00a0value\u00a0in a very short time. INTRODUCTION: The market crash of Monday, October 19, 1987, began in\u00a0Hong Kong\u00a0and spread west to Europe, hitting the United States after other markets had already declined by a<a href=\"https:\/\/www.pgmcapital.com\/nl\/the-30th-anniversary-of-the-crash-of-october-1987\/\">[&#8230;]<\/a><\/p>\n","protected":false},"author":2,"featured_media":16222,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51],"tags":[],"class_list":["post-16196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pgm-capital-blog"],"_links":{"self":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/comments?post=16196"}],"version-history":[{"count":23,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16196\/revisions"}],"predecessor-version":[{"id":16223,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/posts\/16196\/revisions\/16223"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media\/16222"}],"wp:attachment":[{"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/media?parent=16196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/categories?post=16196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pgmcapital.com\/nl\/wp-json\/wp\/v2\/tags?post=16196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}