Today October 19th....20yr anniversary of Black Monday Crash

[Jimbo]

Another wonderful day to daytrade isn't it Stephen? [img]/images/graemlins/smile.gif[/img]

Jimbo

[stephenNUTS]

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Another wonderful day to daytrade isn't it Stephen? [img]/images/graemlins/smile.gif[/img]

Jimbo

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Esp. trying to catch that "BOUNCE" at the close....when you are forced to liquidate,and it aint there!

Unless you were short early this a.m,and STAYED short..this is a perfect example of anyone trying to bottom pick going LONG/reverse through out the day....stocks continue to get killed....and they all run for the exits upon forced liquidations at 4:00 pm

A one-way market like today,that closes at its low...DESTROYS daytraders...and obv hurts most investors as well

[img]/images/graemlins/cool.gif[/img]

[PairTheBoard]

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CAT propelled the sell-off this morning when they said economic conditions in the US are the worst in 50 yrs in their opinion.

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Not exactly according to my listen to the CAT conference call. They were talking about their estimate of Housing Starts in the U.S for 2008. They estimated 1.1 million as compared to 1.4 million for 2007. It was at this point they said, "THIS is the worst we've seen in 50 years". They also estimated overall U.S. GDP growth of around 1.5% for 2008. So the "worst in 50 years" phrase refered to housing starts not overall economic conditions.

Besides that phrase, their projected 2008 earnings were evidently spooky modest. One questioner said that things would have to get "massively worse" for the 2008 earnings projections to be accurate. The CAT spokesman said that they did not want to Overpromise, considering the recessionary trough in 2008 combined with their competitors' having excess inventory and CAT's intention to defend their market share. They stuck to that statement, refusing to be pinned down on whether they intended to defend market share with price reductions. The implication was clear though. They are running at capacity. I assume by "recessionary trough" they were refering to CAT's sector of the economy - housing related and highway trucks - rather than the economy as a whole. That assumption makes the statment consistent with their estimate of about 1.5% domestic GDP growth for 2008. I think their 2008 earnings projections are further complicated by costs and yet unrealized benefits from some new CAT Production program they are ramping up.

Maybe it's CAT's dim view of housing starts for 2008 and maybe analysts read between the lines a little looking at their 2008 earnings estimates to spook the market today. But I didn't hear anything like the clear warning from GE CEO Jack Welch back around the end of 2000 that spending by businesses was essentially zero at that time. I would like to see a major market decline in 2008 myself since I am in cash right now. But I didn't hear a clear warning of that in the CAT conference call. In fact they are gearing up for huge CAT results in 2009 and 2010.

PairTheBoard

[Mark1808]

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I am sure many of you were too young to remember that day,but regardless....post some thoughts on the subject,and are we close to another fateful day like that in the near future?

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I was the assistant manager of a large brokerage firm's office. We had a meeting and I remember telling everyone in the history of the US stock market every plunge in the past has represented a great buying opportunity as the market has always made a new high. I stopped at a fast food drive through on the way home, ordered food and drove right through and was half way home when I realized I didn't have my food! It was a tough day! I don't think at these levels we would ever see a 22% on day drop, but over a period of weeks it is entirely possible.

[mal_noles]

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I don't think at these levels we would ever see a 22% on day drop

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And this is why hedge funds blow up, ridiculous assumptions like this.

[Mark1808]

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I don't think at these levels we would ever see a 22% on day drop

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And this is why hedge funds blow up, ridiculous assumptions like this.

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You realize in the history of the US stock market we only once had a percentage drop greater than 13% and you think it is a ridiculous to assume we probably will never see greater than a 22% drop in one day? This is not why hedge funds blow up. They typically blow up because they are highly leveraged in some highly concentrated positions. But whatever, anything is possible I wouldn't bet on a 22% one day drop happening again though.

[pig4bill]

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I am sure many of you were too young to remember that day,but regardless....post some thoughts on the subject,and are we close to another fateful day like that in the near future?

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Not me. I was holding puts. There were plenty of indications that the market was overbought.

I would've made more than I did if I knew where the market was. Back then, things were mostly done manually. The NYSE had a clock similar to a shot clock that told how far behind the tape was. It usually said 3 or 4 minutes. That meant that the DJIA tape quote told you what the Dow was 3 minutes earlier. It took that long to assemble the quotes and calculate the average. When I called my broker, he told me the tape was 45 minutes behind. Having no idea what the market was doing in the present, I sold when the tape showed 300 points down.

The following days were insane. I was able to call in buy orders to my local broker, but most of my money was in Fidelity. The 800 number was jammed up for the next 3 days. I got through once far enough to get on hold at 11 pm. I gave up at 1 am and left the phone off the hook. The on-hold muzak was still playing at 6 am the next morning.

[pig4bill]

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Another wonderful day to daytrade isn't it Stephen? [img]/images/graemlins/smile.gif[/img]

Jimbo

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Esp. trying to catch that "BOUNCE" at the close....when you are forced to liquidate,and it aint there!

Unless you were short early this a.m,and STAYED short..this is a perfect example of anyone trying to bottom pick going LONG/reverse through out the day....stocks continue to get killed....and they all run for the exits upon forced liquidations at 4:00 pm

A one-way market like today,that closes at its low...DESTROYS daytraders...and obv hurts most investors as well

[img]/images/graemlins/cool.gif[/img]

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GMAB. I made 1.12 points and I wasn't even trying hard.

There are plenty of spots here to make a quarter to a half-point:

[mal_noles]

I was oversimplifying, but yes I do think it is ridiculous to assume we can't drop 22% in a day. Plenty of hedge funds have blown up because of assuming that an outlier or unprecedented event wont occur.

Maybe its the fact that I just reread Fooled by Randomness but as a trader I never rule out any event. In fact on a monthly basis my group has a meeting to discuss how we will handle situations that are highly unlikely or that we dont ever expect to actually occur.

[Micturition Man]

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I was oversimplifying, but yes I do think it is ridiculous to assume we can't drop 22% in a day. Plenty of hedge funds have blown up because of assuming that an outlier or unprecedented event wont occur.

Maybe its the fact that I just reread Fooled by Randomness but as a trader I never rule out any event. In fact on a monthly basis my group has a meeting to discuss how we will handle situations that are highly unlikely or that we dont ever expect to actually occur.

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Totally agree with this.

The market is not a self-contained system, and on top of that the historical data we have covers only a fraction of what will be the lifespan of the market (one hopes, anyway).

Even ignoring the risks inherent in the markets, there is always the possibility of "5 sigma" type exogenous events like, say, a meteor crashing into the earth, an nuke being detonated in NYC, or something.

Never say never.

BTW it's a pet peeve of mine that hedge fund managers get so much credit for being soooo brilliant at making money, when in fact the great majority of them just take huge risks via leveraging that they themselves do not even appreciate.

Give me a few M seed money and the ability to leverage it at 6:1 and I can give you 50% returns too. (Unless I go broke that is.)