Paul "The Man" Tudor Jones in the NYT

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Quote from Maverick1:

Paul Tudor Jones II leans back in his chair and grins. The stock market is going to crash, and he knows it. “There will be some type of a decline, without a question, in the next 10, 20 months,” he says in his rich Memphis drawl. “And it will be earth-shaking; it will be saber-rattling.” ...

Except that the crash to which Mr. Jones refers occurred Oct. 19, 1987. His prognostication — brazen, and as impudent as the man himself — was made in a documentary called “Trader,” which was filmed in the year preceding that day.

Now, 20 years after the 508-point decline, several strategists are anticipating that the earth will shake again. Valuations are stretched beyond historical comparisons. The market, ever more volatile, is reaching new highs, ignoring a buildup of bad news. Most crucially, the strategists say, the sentiment that the market’s rise is infinite seems to have taken permanent hold.


At the end of the day Oct. 19, 1987, stocks were down 22 percent — precisely the “Acapulco cliff dive” predicted by Mr. Jones in the video. The day ruined the careers of many, but it made the reputations of Mr. Jones and Mr. Prechter, whose professional relationship dates to the mid-1980s.

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No one, including Mr. Prechter himself, claims that Mr. Jones relied solely on Mr. Prechter’s call. Indeed, in the video Mr. Jones can be seen as early as 1986 making a case that the market would fall. But the crash did not last long. Prices rebounded the next day, and within two years, the market had regained all that it had lost that day.

Now, Mr. Prechter is suggesting that the country is facing not just a market crash, but also a depression. On every measure, he says, the market is more overvalued than it was in 1987 before the reversal. The price-to-book ratio of the S.&. P 500-stock index today is 4.04, compared with 1.73 in 1987. And measures of the bullishness of Wall Street traders confirm Mr. Prechter’s assessment of the overvaluation.
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“People will be gasping,” Mr. Jones says with glee in the video, referring to the 1987 crash that he was sure would come. “It will be total rock ’n’ roll.”
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So? 1987 actually turned out to be just a blip. This is what occurred:

"In the days between October 14 and October 19, 1987, major indexes of market valuation in the United States dropped 30 percent or more. On October 19, 1987, a date that subsequently became known as "Black Monday," the Dow Jones Industrial Average plummeted 508 points, losing 22.6% of its total value.

According to Facts on File, the 1987 crash "marked the end of a five-year 'bull' market that had seen the Dow rise from 776 points in August 1982 to a high of 2,722.42 points in August 1987." however, the market rallied immediately after the crash, posting a record one-day gain of 102.27 the very next day and 186.64 points on Thursday October 22. It took only two years for the Dow to recover completely; by September of 1989, the market had regained all of the value it had lost in the '87 crash.2

Many feared that the crash would trigger a recession. Instead, the fallout from the crash turned out to be surprisingly small. This phenomenon was due, in part, to the intervention of the Federal Reserve. According to Facts on File, "The worst economic losses occurred on Wall Street itself, where 15,000 jobs were lost in the financial industry."3
 
Quote from Maverick1:

...I have heard that there was a picture of a gann wheel in his office but don't see the big deal about that either...
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I suppose that if someone caught me on video with a gann pinwheel in my office, I would do whatever possible to quash that video. No one should be subjected to that kind of embarrassment.
:D
 
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