Not to bring up the '87 crash, but...

Bloomberg columnist Chet Currier draws some spooky parallels between 1987 and 2007:

--Then, as now, stocks were riding high after five years of gains.
--Then, as now, financial innovation was on everybody's lips (program trading, derivatives, portfolio insurance strategies).
--Then, as now, the economy was in pretty good shape.
--Then, as now, interest rates were rising in the bond market, increasing the allure of bonds over stocks.
--Then, as now, a weakening dollar was starting to freak out currency markets.

The funny thing about that '87 crash - and what should provide some comfort - is that on an historical stock chart it registers as a mere bump. The Dow is now running about eight times its closing low on Oct. 19, 1987.

From the perspective of 20 years later, a look back at the crash of '87 drives home one more compelling point. The fact that the decline looks so small on the charts today tells us something about the amazing scope and power of the surge in growth that surrounded it. The crash was a big deal. The worldwide boom we are living through is far bigger still -- so big it was able to dwarf what we might otherwise remember as one of the worst financial disasters of all time.

Er, just for the record, the Dow is down 145 points this morning.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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