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October 23, 2017 | Taleb: ‘Greenspan Thought he had a Magic Wand’ Now we have the Moral Hazard

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Taleb offers some good first-hand historical perspective in this discussion, also some key points to understanding the genesis of our current free market-free mess.

The Black Monday crash was 30 years ago this week. “Black Swan” author Nassim Taleb was a trader for First Boston at the time. He made a lot of money while others lost fortunes. He recounts the experience with Bloomberg’s Erik Schatzker.  Here is a direct video link.

Also see The New Yorker: Waiting for the “Trump Slump” in the stock market:

The Federal Reserve is tightening monetary policy at a time when stocks are trading at valuations well above their historical averages. Looking back, this combination of circumstances has often proved disastrous for stocks. The stock-market crashes of 1929, 1987, and 2000 all came at moments when the Fed was raising interest rates and valuations were elevated.

Of those three crashes, the one on Black Monday may well be the most pertinent. In the autumn of 1987, as today, the economy appeared pretty healthy. Profits and payrolls were rising, and the stock market was on a tear. In the first nine months of the year, the Dow rose by more than forty per cent. But, even though prices had risen to very high levels relative to earnings and accounting values, they weren’t quite high enough for investors to agree that a bubble had inflated. (In October, 1987, the price-to-earnings index of companies in the S. & P. 500 index was about twenty-three; today, it is about twenty-five.) And, apart from Elaine Garzarelli, a stock analyst at Shearson Lehman, virtually nobody predicted a big sell-off.

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October 23rd, 2017

Posted In: Juggling Dynamite

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