Broker A (formerly known as The Fly) stated that veterans were feeling that the current correction felt similar to that of 1990-1991.
The chart shows the typical pattern for a correction: Sharp down moves followed by short consolidations. One aspect which should be noted are the capitulation days which are marked by big moves on large volume. Also, when the bottom actually was put in, it looks as if it was marked by little fanfare. The only tell-tale signs were the bullish divergences in the indicators and the higher-low.
It might be interesting to understand what caused this correction. Does anyone out there remember?
Since you guys were in jr. high back then, I’ll have you know it was a recession.
Gulf War also happened during that time period.
woodie,
You are defining the 90/91 event as a correction, a cyclical bear in a secular bull, which, no argument, it was [combined with a shallow recession within the economy]
Are you by inference thus claiming that currently we are also experiencing a cyclical bear in a secular bull?
If not, does this rather not cloud the issue, apples to oranges so to speak?
jog on
grant
Alpha- duh, the Gulf War. By the way, I was a senior in high school then, not in jr. high.
Hmmmmm. A recession you say?
Ducati, no, I’m not claiming that we are experiencing cyclical bear in a secular bull. I think the case can be made for the opposite.
The purpose of the exercise is simply to put a visual emphasis on how markets trade during a correction, and to highlight the typical patterns contained therein.
Again, not trying for apples to apples. Although I think a correction which leads to a longer bear period will still start out looking like most other corrections. Am I making sense?
Do you answer your email anymore 🙂
SnL scandal– fucking retards.
Wood:
Back then, banks were going bankrupt, left and right.
The environment was very similar to today’s.
Take a look at the banking index back then.
woodie,
Then my question would be, based on a visual representation from the charts, do cyclical corrections and secular bears look the same?
If there are differences, what in point of fact are they?
Referring to comments elsewhere;
1987 correction…..anomaly?
1929 secular Bear….anomaly?
jog on
grant
Drosophilius,
I was waiting for someone to mention the SnL’s and financial crisis.
Rewind to 1982, another Banking crisis, Citi, again almost bankrupt, securitised loans causing defaults and bankruptcy, Continental Illinois……..yet, 1982 marked the launch of the greatest secular bull market so far in history.
Thoughts?
jog on
grant
liquidity problems, falling dollar and housing crisis were the culprit back then.
Grant, unfortunately I cannot find a daily chart of the 1920s-30s. Help in that area would be appreciated.
I will have to continue my research to answer your question about corrections in secular bulls vs. secular bears.
I do think 1987 was an anomaly. What do you think?
Fly,
That’s right …. same shit only on a local bank level rather than a regional bank level …. locals banks got caught up in lending to developers based on inflated RE appraisals (some fraudulent and some just way too optimistic) as well as home buyers. When the banks got squeezed from rising rates and fixed rate mortgages the Fed moved in and found the loans were upside down and started the liquidation via auction …. the resulting RE depression can be blamed for the correction and recession.
So once again those fuckers in the banking/mortgage business have most likely brought about another recession as a result of their self-serving commission driven appraisals, mortgages and real estate sales. Can we look forward to the RTC coming to your town to auction off bank owned assets that were upside down or left vacant by the owners not to mention their bank owned cars, boats, planes and artwork?
Got me to thinking about how my local bank got rich over night and built a new bank that resembled a museum … damn, those were greedy times! Trump screwd his stockholders to salvage his personal holdings and the little guy gave it up to the big guy via gov’t auctions of land, bldgs, homes, you name it!
Maybe this time the gov is letting foreign money bail out the banks instead of the taxpayer …. odd no?
http://query.nytimes.com/gst/fullpage.html?res=950DE1DC153FF93AA25753C1A96F948260&n=Top/Reference/Times%20Topics/Subjects/S/Savings%20and%20Loan%20Associations
http://query.nytimes.com/gst/fullpage.html?res=950DE6D81439F935A25754C0A96F948260&n=Top/Reference/Times%20Topics/Subjects/S/Savings%20and%20Loan%20Associations
http://query.nytimes.com/gst/fullpage.html?res=9E0CE1DA103BF936A3575BC0A964958260&n=Top/Reference/Times%20Topics/Subjects/S/Savings%20and%20Loan%20Associations
The big question though is can this be contained to correction/recession or will a secular bear develop now that the bull has been snorting and running for some time now. Have we had two or three legs up? Leg #1 from 8k to 10k, leg #2 from 10k to 12k and leg #3 from 12k to 14k or higher? Looks like we’ve had three up already unless this raly holds and ultimately makes a new high but that seems unlikely given the current state of the real estate market with impending reductions in home values and the possibility of more than sub-prime ending up on the auction block ….
Hope this scenario doesn’t pan out but, without inflation, the newby homeowners (last 3yrs or so) with 20% or less equity face very difficult decisions soon when banks find they too are upside down and ask them to ante up another 5-10%.
PS: Bot some zero-coupon bonds for my son back then and gave them to him when he turned 18 …. wish I had backed up the truck for myself as it was one of the best investments I ever made … yields were insane!