The Ides of September in 2008 is simply the latest manifestation of autumnal market turmoil. That day, Lehman Bros. and Merrill Lynch bit the dust and the world changed dramatically. Of course this is nothing new, which is why there's reason again to break out the stock worry beads. Little wonder, the autumn is also called "the fall."
Of course, autumn comes in March in the southern hemisphere. But no matter. A quick survey of market catastrophes reveals that autumn, north or south versions, is not only when the traditional harvest comes in, but also when we reap what we have sown -- whether it's corn or bad economic policy.
For skeptics, here are the biggest crashes and their blamed causes:
-- Oct. 24, 1929 -- a disaster caused by a speculative bubble, unrestrained credit to punters, rampant fraud, a vacuum in bank regulations, a real estate bubble and an influenza epidemic
-- November 19, 1973 -- a stock dive after the U.S. dollar was decoupled from the gold standard, Bretton Woods currency valuations unraveled and the first oil price shock hit.
-- October 19, 1987 -- a worldwide crash that began in Hong Kong and spread wildly due to overpricing, program trading and herd psychology led by certain forecasters.
-- October 27, 1997 -- the Asian contagion which hit stock markets due to worries about Asian economies, their currencies, their banks and rogue trading. The decline sparked serious drops in consumer and spending confidence.
-- March 10, 2000 -- the dot-com bubble crashed after years of over-valuation, fraud and excess liquidity. Fundamentals for high tech companies fell after the spending binge, to avoid the alleged Y2K Millennium bug, ended because the danger was vastly overstated.
-- September 11, 2001 -- markets closed after the terrorist attacks, but on September 17, when they re-opened, the crash was frightening.
-- September 24, 2002 -- a year after 9/11 markets dove again amid economic and political jitters, war drums regarding Afghanistan and Iraq plus the negative psychological fallout from the attacks.
-- September 15, 2008 -- Lehman Bros. and Merrill Lynch bite the dust causing a precipitous drop after years of excess liquidity, banking malpractice and poor regulation bring down America's real estate and banking systems. On September 29, 2008 another market crash occurs as fear spreads.
-- Fall 2009?
The anniversary of the Lehman fiasco has been marked by some forecasters predicting more disaster, based on extrapolation. Others point to symptomatic conditions such as surging markets, rampant short positions, increasing commodities prices, increasing interest rates, shaky economies and banks, frightening deficits and debts by governments, currency jitters and a falling Baltic Exchange Dry Index which means, in English, that the terrible declines in trade will worsen. Oh yes, then there's Afghanistan, Iran and the looming global influenza pandemic this autumn.
But then there's Robert Froehlich, with DWS Scudder, who pointed out recently that since 1950 the average return of the S&P 500 from early November to the end of April has been 9% compared to 2.71% for the other six months.
So, like Job in the Old Testament, I prefer to keep my faith and optimism on the basis that when everybody is thinking along the same lines, and the press is fiercely amplifying that group-think, the opposite result is much more likely.
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