Oct. 17, 2012, 8:35 a.m. EDT
Another stock crash like 1987’s is inevitable
Commentary: Investors are beholden to big traders’ whims
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Prepare yourself for another stock market crash as big as the free fall in October 1987.
That’s a daunting prospect indeed, since at current levels such a decline would mean the Dow Jones Industrial Average would plunge by more than 3,000 points in a single trading session.
And we’re kidding ourselves if we think that market regulatory reforms such as circuit breakers will be able to prevent it.
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Crashes are an inevitable feature of the investment arena because every market, to a more or less similar degree, is dominated by its largest investors. When those large investors collectively want to get out of stocks, which will happen on occasion, they will find ways to circumvent myriad downside protections such as circuit breakers that may be in place.
Profession Gabaix therefore recommends that all of us — whether individuals or large institutional investors, such as banks and mutual funds — cushion our portfolios so that a crash as large as 1987’s won’t be fatal.
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Repeat after me: Another stock market crash as big as 1987’s is going to happen. Period.
More: http://www.marketwatch.com/story/another-stock-crash-like-1987s-is-inevitable-2012-10-17?dist=lcountdown
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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