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Equity Markets - Relations between the 1929 & 1987 crashes and present risks.

DOW JONES

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"HOW BAD CAN IT GET?"

Pretty bad...Here are some statistics to put it all in perspective:

From the 1899 to the 1990 there have been 26 Bear Markets.
The average length of a Bear Market is 17.4 months
The average decline is 30.8%, (Almost 1/3 of your holdings)
The largest declines:
1901(-44%),
1906(-46%),
1929(-90%),
1937(-47%),
1939(-41%),
1968(-44%),
1973(-46%),
1976(-27%),
1987(-41%),
1990(-27%).

Composite Bond Rates
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Market Summary
Commentary and analysis about the bond market

Although sentiment generally is quite optimistic, it is noted that a large number of commission houses are strongly advising customers to take profits during advances in the stocks being carried. Similar recommendations in the past resulted in clients losing their long position and paying higher prices for their favorite shares, so that it is now admitted that many outsiders are not inclined to follow this advice at the moment. Many are looking for technical corrective reactions from time to time, but do not expect these to disturb the upward trend for any prolonged period.

- Wall Street Journal, 9/4/29

Dow Diaries: The 5 one day bigger moves

The biggest was the historic crash that brought the industrials down 22.61% on Oct. 19, 1987. Among the causes of the 1987 crash were rising interest rates, the U.S. bombing of Iranian oil platforms, friction with U.S. trading partners, rampant speculation in the futures markets, and loss of investor confidence after the Dow industrials skidded in September and early October.

The second-worst, third-worst and fourth-worst days occurred within about a week of each other in the crash of 1929. As in 1987, the 1929 crash had been preceded by a boisterous economic and stock-market boom. Speculation by investors who needed to put down only 10% of the purchase price for their stocks fueled the Roaring Twenties bull market, but also aggravated the crash. When their brokers demanded more collateral, investors were forced to sell shares, producing a downward spiral.

The fifth-worst day was Dec. 18, 1899. According to historian Robert Sobel of Hofstra University, the U.S. had suffered some casualties in the Philippines fighting against guerrillas seeking independence, and the British had suffered losses in the Boer War. What's more --- as is so often a factor in market declines -- interest rates were rising.

EMERGING MARKET DEBT SPREAD TO TREASURIES

AND GOLD FUND INDEX DAILY

30Y T bond yield

ABN emerging market debt spread index

10 global Gold and Silver Mutual Funds index

10Y T bond yield

5 Y T note yield

Philadelphia Gold and Silver Index

Chronology: Fed Policy Changes
Economic Report of the President:
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