87 crash

I got my clock cleaned in 2003 on the shortside, but.... there is quote somewhere (I'm sure I'm butchering it)

Don't ever try to play for a crash because it maybe only happens once....

If anyone has the real quote please post
 
If we had trading curbs, and the PPT in place in 1987, we wouldn't have had a crash.

At that time, program trading dominated the landscape, and while we still have program trading, there are now "artificial" forces at work to control the decline to make it more "orderly."

In addition, we have survived crashes before, so people will be more willing to "buy the dip."

Also, while we have had a nice run, there is still lots of money on the sidelines. We are not as fully invested on a percentage basis as we were in at the peak in 1987 nor in 2000.

Crashes are very unlikely in an election year, unless there is a concerted and organized effort by all democrats and Bush opponents to pull out of the market at the same time.

Now there is an idea, would that be considered an act of terrorism if wealthy democrats and people like Soros decided to act together to bring down the stock market "legally"???
 
The Fed-speak as of late seems directed more at the bond market, as if they are trying to make sure a bid remains in treasuries; there are any number of players that could get hurt from quickly rising rates, FNM for one, China, Japan could also become sellers.
 
Quote from trade-ya1:

I'll make a controversial statement here. While it is highly likely that we will see an orderly decline, we will not see a crash anymore due to the proliferation of hedge funds. Reason being is that the market has much more 2-way action due to hedge funds (longs and shorts) which will buffer the market on the way down with shorts looking to cover positions. Back in '87 there was relatively no significant short position (or 2-way action) in the marketplace and hence things fed on themselves. This is why i really can't understand why some countries frown upon short-selling in their markets. It creates a dampening of volatility by creating natural buyers on selloffs. Just my 2c.
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While I agree that we'll never see a one day 22% break again in our lifetime (you stats guys can figure out what a tremendous statistical anomaly '87 was)I'm going to argue your statement with something even more controversial. I don't see any evidence that liquidity buffers volatility! The ratio of strong vs. weak positions, the equilibrium remains constant regardless of how many traders are positioned.

The Treasury market, far more "liquid" and volumous than equities, had a rally the week of the '87 stock crash that was as dramatic on the upside as the crash was on the downside. No one accused program traders or options expiration (Friday before crash) for the rally in bonds. Instead it was "flight to quality." 10 Bond pts overnight on Monday-Tuesday. And that's in a market that always had arbs and hedge funds providing liquidity. It doesn't matter if it's 10 guys trading or 10,000,000, all it takes is for some fraction of positions to become so dislodged that it's like a game of musical chairs at Madison Square Garden instead of someone's living room.
 
Quote from illiquid:

The Fed-speak as of late seems directed more at the bond market, as if they are trying to make sure a bid remains in treasuries; there are any number of players that could get hurt from quickly rising rates, FNM for one, China, Japan could also become sellers.
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The '87 crash was precipitaed much more by the bond collapse over the summer than $ weakness. My prediction: when the $ bottoms is when U.S. and European stocks break.
 
Quote from joethemoustache:

quote from mg financial...

"Recall that an orderly decline in the dollar turned ugly was the very backdrop in 1987. Only this time the US is the world's largest debtor nation, not a net creditor, which means the downturn could be worse as it requires $2 billion in foreign financing a day. In the near term US deficits may continue to be funded by Asian central banks, but it may eventually take a sharp rise in bond yields (wanted or not) to stop the dollar's decline."
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You nailed it. This so-called "orderly" decline in the dollar is about to turn into a crash, probably tomorrow. :D
 
The bond market move was limited to 2 points a day.

There was a reversal to be sure, but it was a flight to quality and short covering more than anything else. Hardly as dramatic as the slide in bonds that helped trigger the stock selloff.

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Quote from Pabst:

While I agree that we'll never see a one day 22% break again in our lifetime (you stats guys can figure out what a tremendous statistical anomaly '87 was)I'm going to argue your statement with something even more controversial. [/i]I don't see any evidence that liquidity buffers volatility! [/i] The ratio of strong vs. weak positions, the equilibrium remains constant regardless of how many traders are positioned.

The Treasury market, far more "liquid" and volumous than equities, had a rally the week of the '87 stock crash that was as dramatic on the upside as the crash was on the downside. No one accused program traders or options expiration (Friday before crash) for the rally in bonds. Instead it was "flight to quality." 10 Bond pts overnight on Monday-Tuesday. And that's in a market that always had arbs and hedge funds providing liquidity. It doesn't matter if it's 10 guys trading or 10,000,000, all it takes is for some fraction of positions to become so dislodged that it's like a game of musical chairs at Madison Square Garden instead of someone's living room.
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Yes two point limits that expanded to three. Bonds were limit bid 3 days in a row. Synthetically in options on Tuesday 10pts higher. The statistical likelihood of a 15% 1 day rally in bond prices was about as unlikely as a 1 day index move of 22% in stocks. (bonds traded at lower volatility then the indices)
 
The '87 crash couldn't have been so violent without portfolio insurance which isn't a factor these days. IMO the only way we could see something like that again would be from a market malfunction that exchanges aren't able to stop...sort of like the Globex problems but on a much larger scale.
 
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