Everybody keeps comparing our current financial mess to the Great Depression. But for my money, it looks and feels like October of 1987.
On Black Monday the market fell over 20% in one day. That was pretty bad. Mind you, the market had rallied over 30% early in the year, and essentially gave it all back from August through October. But the volatility was a killer.
On Tuesday many of the specialists on the New York Stock Exchange had had their equity wiped out. So many stocks just stopped trading. Soon the indices stopped trading as well. We were looking at a true financial seizure.
That’s what it looked like last Thursday when T-Bills traded with negative interest rates. But just like 21 years ago, someone stepped in with a plan to normalize the markets. In 1987 it was the big investment banks. This time it’s big Hank Paulson.
In 1987 we actually ended the year with a positive return. The lesson was that nothing is as bad as it seems. Crises come and go, but people who can hang on usually end up okay.
Douglas R. Tengdin, CFA
Chief Investment Officer
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