October 30, 2008
– Comments (8)
Interesting graph over on Calculated Risk showing today's crash in contrast to the dot com crash and the 1973 oil crisis and the 1987 crash. Quite dramatic really...
Interesting graph DWOT. It's important to remember that valuations were much more out of line at the beginning of those other three crashes. The 1973 crash and subsequent bear lasted 10 years and was right after the 'nifty fifty' stock price escalade (everybody just had to own an IBM or XEROX no matter the cost) and it was compounded by Watergate, Nixon's resignation and the second embargo at the end of that decade. The 1987 stock bubble had the S&P I believe at a p/e of near 30. And of course the dot.com crash was a correction of the go-go nineties when the NASDAQ reached absurd levels over 5000 and people were willing to buy DELL at 160 p/e. When this correction began I believe the S&P was around p/e 18 trailing earnings. Of course, as we all know stock prices reflect future earnings so if we are headed for drastically reduced earnings across the board none of the comparisons matter. Thanks for the graph.
i can't say i'm surprised, it feels like a 'cliff fall'.
You'll notice that without government "help," crashes don't last very long.
lenri--wishful thinking is bad investing. Stocks were and still are way overvalued. Multiple contractions!
See also this chart from the New York Times - It shows these crashes and more, going back to 1929. Click on each line on the chart for details.
Ouch lenri, how much of that S&P trailing earnings was:
1) Unsustainable banking activities, which also seem fraudulent to me.
2) Bubbled commodity prices?
3) Paying bubbled other prices?
4) Bubbled equity gains?
I think history might show that trailing S&P to be one of the most jacked up in history.
You mean charts like this and this and this and this, that my friend MauiPeter and I have been laying out in this forum since July 4, 2008?
I'll have an update to those curves coming in the next week, just as soon as I can get this thing called "work" out of the way. So far, the numbers and the curves have been a decent predictor of this market slide. For reasons listed in the above linked blogs, I think we'll see the DJIA down to around 7500-7800 before the pain is really done.
I did enjoy the video at your Calculated Risk page, though. Funny stuff!
Hi Dwot. Certainly they were bubbled up in financials and insurance and certain other interconnected sectors but if they were bubbled up in the manufacturing, energy and other industries would we not be seeing the corrections already in this age of Sarbanes-Oxley? For sure we have seen it in stocks like E-Trade and AIG that have been affected. Why not the others? Tight capital, of course, will have wide-ranging future effects but is it really Armegeddon?
You have given the best source so far to prove the ongoing recession which will hit many unrelated sectors like retail and manufacturing in the future with your Alt-A (liar loans) still having to be flushed out of the system. I don't think we will hit bust through 14000 Dow anytime soon but investors make money in all markets if they try to avoid the fear factor. Of course that is easier said than done. Anyway I have been reading the blogs daily for any and all advice I can get. Thanks fools.