How bad was Monday, really?

[Pliablemoose]

Monday's market plunge may have been the worst point drop ever for the Dow Jones Industrial Average, but in percentage terms it came nowhere close. It dropped 7% on Monday, or just one-third as much as the 22.6% decline in the 1987 crash.
In fact, there have been 16 other occasions since the Dow was created in 1896 in which the Dow's percentage drop was greater than it was Monday. That works out to an average of every seven years.
It furthermore has been almost exactly seven years -- Sept. 17, 2001 -- since the last time the Dow dropped by a greater amount than it did on Monday.
From at least one statistical perspective, this all adds up to Monday's drop being overdue.
Several years ago, researchers at New York University and Boston University derived a complex formula for calculating how often drops of a particular magnitude will occur over long periods of time (measured in centuries).
According to their formula, 7% declines will occur, on average, every 4.3 years. Going into Monday's session, the market had been going 2.7 years longer than this without that big a drop.
To be sure, the S&P 500 index SPX dropped by more than the Dow did on Monday -- by 8.8%, in fact. And, according to the researchers' formula, drops of that magnitude should occur only once every 10 years, on average.
But the last time the S&P 500 dropped by more than it did Monday was in the 1987 crash -- more than 20 years ago.
So, from this perspective, the S&P 500 was more than a decade overdue for a decline like the one we saw Monday.
This doesn't make Monday's losses any less painful. But the researchers' data serve to remind us that big drops are an inherent part of stock-market investing.
If we didn't know that going into Monday, we surely do now.

One of my pet peeves is that the talking heads always say "Worst point drop in history." completely ignoring the % metric which means a hell of a lot more.

But then if they used percentages, the headlines wouldn't look as cool.

Link

 

[Cuda1447]

Let's see how it does today....

 

[alchemize]

Buying opportunity.

 

[IHateMyJob2004]

In terms of percentage drop, Monday was the 4th worst day on wall stret ever. PERIOD.

Was I the crash in 1987 that was due to program trading? I hate to tell you this, but Mondays crash had nothing to do with program trading. It was actually based on reality.

 

[GTKeeper]

Originally posted by: alchemize
Buying opportunity.

Not yet. There will be more pain

 

[Pliablemoose]

Originally posted by: IHateMyJob2004
In terms of percentage drop, Monday was the 4th worst day on wall stret ever. PERIOD.

It was the 17th worst percentage drop.

 

[alphatarget1]

keep in mind that short selling is still banned, so it probably could've been worse.

 

[GTKeeper]

Originally posted by: alphatarget1
keep in mind that short selling is still banned, so it probably could've been worse.

Put options are not

 

[dmcowen674]

Originally posted by: Pliablemoose
Topic Title: How bad was Monday, really?

Was a great day of course

 

[Pliablemoose]

Originally posted by: GTKeeper

Originally posted by: alchemize
Buying opportunity.

Not yet. There will be more pain

Yep, when the bottom drops out, and it seems there's no end in sight, that's when to buy.

Wait for capitulation to occur, it's coming, but it's not here yet.

 

[alchemize]

Originally posted by: GTKeeper

Originally posted by: alchemize
Buying opportunity.

Not yet. There will be more pain

If nothing is passed, I'd agree. I think we'll have a bill by the end of the week. If the second bill doesn't pass, all bets are off.

 

[Thump553]

Go back from roughly mid-August forward. There is a lot more blood on the floor.

 

[retrospooty]

Here's what you do: Keep breathing. the rest will be allright. No worries.

 

[Pliablemoose]

Originally posted by: retrospooty
Here's what you do: Keep breathing. the rest will be allright. No worries.

Nooooo, the sky is falling, it really is...

 

[Hayabusa Rider]

Originally posted by: Thump553
Go back from roughly mid-August forward. There is a lot more blood on the floor.

Perhaps this is a better perspective of the situation.

While it's true that news agencies like to maximize bad news for effect, the real consequences of the situation go back before Monday.

Worse, the Dow isn't the economy. It's a reflection of how it may be doing, and indirectly at that.

If you look at the financial underpinnings, the "how stuff gets done" , they are the worst since '29.

Not good.

 

[Specop 007]

Totally agree with the OP. I HATE points listing. I want percentages! I dont believe we've seen much over a 5% drop on any single day for DOW. NASDAQ I believe was down 9% or a touch over. While that is a eye brow raising amount its certainly not horror face, hair pulling, window jumping or shock and awe.

But the media sure tries......

 

[Pliablemoose]

Originally posted by: Specop 007
Totally agree with the OP. I HATE points listing. I want percentages! I dont believe we've seen much over a 5% drop on any single day for DOW. NASDAQ I believe was down 9% or a touch over. While that is a eye brow raising amount its certainly not horror face, hair pulling, window jumping or shock and awe.

But the media sure tries......

NSFW

 

[Specop 007]

Originally posted by: Pliablemoose

Originally posted by: Specop 007
Totally agree with the OP. I HATE points listing. I want percentages! I dont believe we've seen much over a 5% drop on any single day for DOW. NASDAQ I believe was down 9% or a touch over. While that is a eye brow raising amount its certainly not horror face, hair pulling, window jumping or shock and awe.

But the media sure tries......

NSFW

Thanks for the warning. Not that it matters much though, bbzzdd is blocked by our firewall.

 

[LegendKiller]

1. 1987 had nothing to do with fundamental shifts in the economy, or a dire economic situation. Almost all of the loss was gained back in weeks. To compare it to 1987 is just plain silly.

2. The DJIA is a poor measurement of the actual economy, as it is far smaller than the bond market for corporate or asset backed bonds. Nevermind the CP or ABCP markets, both of which are large. Overnight bond rates are at 7%, overnight ABCP rates are at 9%. Both of which will be passed on to consumers.

There is no bond index that takes all of this into account, if it did, a lot more people would be a lot more worried.

 

[The-Noid]

Originally posted by: GTKeeper

Originally posted by: alphatarget1
keep in mind that short selling is still banned, so it probably could've been worse.

Put options are not

If you read the language you can't purchase put options with the purpose of shorting a stock.

They are only for hedging at this point.

 

[K1052]

LIBOR just hit a record high in an already tight credit market. If it keeps going the commercial financing market will implode and a lot of companies are going to find themselves unable to secure short term financing at manageable rates over the next year.

Our company has already killed five major projects because the financing isn't going to work for anything that we haven't already secured it for.

 

[Pliablemoose]

Originally posted by: K1052
LIBOR just hit a record high in an already tight credit market. If it keeps going the commercial financing market will implode and a lot of companies are going to find themselves unable to secure short term financing at manageable rates over the next year.

Our company has already killed five major projects because the financing isn't going to work for anything that we haven't already secured it for.

The commercial market was due for a hit anyway, creative financing FTL.

 

[LegendKiller]

Originally posted by: Pliablemoose

Originally posted by: K1052
LIBOR just hit a record high in an already tight credit market. If it keeps going the commercial financing market will implode and a lot of companies are going to find themselves unable to secure short term financing at manageable rates over the next year.

Our company has already killed five major projects because the financing isn't going to work for anything that we haven't already secured it for.

The commercial market was due for a hit anyway, creative financing FTL.

Do you even know what you're talking about?

didn't think so.

 

[K1052]

Originally posted by: Pliablemoose

Originally posted by: K1052
LIBOR just hit a record high in an already tight credit market. If it keeps going the commercial financing market will implode and a lot of companies are going to find themselves unable to secure short term financing at manageable rates over the next year.

Our company has already killed five major projects because the financing isn't going to work for anything that we haven't already secured it for.

The commercial market was due for a hit anyway, creative financing FTL.

If by "hit" you mean assassination then you're closer to the mark of what is going down.

 

[Pliablemoose]

I notice the biggest advocates of the nationalization of private debit have a vested interest in it.

If you think folks are pissed off now, just wait, if TARP is passed in one form or another, the average person footing the bill will continue to see their standard of living decline.

We all know that's been going on and will continue to go on despite a bailout. They'll blame congress, the executive branch and the lending institutions and there will be no hiding.