October 1987.... plus, Market Going To The Dogs - Literally

The largest one day percentage crash on Wall Street was on Bloody Tuesday, October 29, 1929, right? Wrong. It was 58 years later, on Black Monday Oct.19, 1987. Does anyone remember that crash now?  Well, I do -  even though it appears as a mere blip on charts today.

I remember it very well, however, because I was right there when it happened, working for a largish investment bank. I owned a nice position of out of the money OEX puts, so I had dinner at Smith & Wollensky that night, bottle of French red included. Others were a lot less fortunate, of course.

Just 7 weeks before the 1987 crash, S&P 500 topped-out at around 337, a huge 21% above its 12 month moving average (Chart 1).  After a few weeks of back and forth, it crashed to 215, -35% top to bottom.

 

Chart 1

Fast forward to today:  S&P 500 made a recent high of 3870 just a few days ago, a level 19% above its 12 month moving average at 3260 (Chart 2). I'll leave it there for now, except... 1.21x3260 = 3945 and 0.65x3870 = 2515. 

 Ok, Ok, one more: doing the same comparison for Wilshire 5000, the broadest, most inclusive index for US equities, the percentages are +20% for 1987 and +22.5% today, i.e.today  the broad market is even more over-exteded than in 1987.

Chart 2

In other news, the market is going to the dogs.  Literally.

Yesterday, a friend very near and dear to me, and professionally completely unrelated to financial markets, asked me what I thought of DogeCoin.  I had never heard of it and. at first, I thought it was a joke, so I asked back if it was legal tender in Venice, ha, ha, ha (The Doge, wink, wink).  I then realized that it is a "real" cryptocurrency started in mid-2017 - yes, folks, doggy-coin is real (well, as real as these things go).

This dog (literally) was "trading" (ye, Gods!) at around $0.0025 until the end of 2020, when..   jump doggy!! it leapt to $0.055 in just a few days.  Yup, woof, woof, wag tail, that's a good doggy, here's a biscuit (or a truckload): up 22 times !! (Chart 3).  My friend, wise beyond her years, believes it's all about "crazy" money, bets borne out of lock-down boredom and a lack of alternatives to spend on.  It's like buying a pair of shoes, or a night out, she said. I guess she's right (woe is me if I disagree, ;).

Chart 3

The bubble marker blow-off phenomena are multiplying.  So... fancy a tulip? Good doggy.