I was in college in 1987 -- a sophomore to be exact and in an economics class when I first new that the market was dropping hard. My professor pointed it out at the start of class. I lost a fair amount in that drop -- made worse thanks to my exquisite timing of putting my remaining cash into the market at precisely the top in late August of that year.
The good news is that I knew immediately that it was done -- one of the shortest bear markets on record it only lasted a few months but I knew it was over. Had no doubt we would not repeat 1929. The bad news is that I didn't have any cash to put to work to take advantage of that thought. I also don't think I rearranged the portfolio in some magical way to take advantage of my bullishness. I did ok but I owned plenty of stinkers over the next few years.
sharp drop on Friday -- this one is earnings driven as people have decided the earnings won't be as good going forward. Not worried about financial crisis anymore but now worried about slowdown and margin compression. First on the slowdown -- sure some industries will slow or have slowed but overall we are not going to have a recession. the economic cycle research institute says so -- have yet to see them wrong in 7 years of forecasting so I give them the benefit until they are wrong.
On margin compression -- sure some industries will suck while others soar. I would argue against looking at the macro picture or trying to figure out the right margin level for the aggregate of corporate profits -- instead focus on individual companies. Case in point would be Friday's markets -- Google up while everything else is down 2.5%.
comments on some of my stocks to follow.
no I don't think we are going to crash on monday -- 100 years of markets and we have crashed twice. Its a low probability event that too many people are expecting. will we be down this week -- absolutely -- quite likely anyway. depends on the stock and their earnings.
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