Welcome to Black Tuesday

By Dian Vujovich

Black Tuesday is always October 29  but you’d never know it this year. The S&P500 is having the best performance month it has inthe past two years reaching another all time high. So is this high to be followed by a low? Or  worse yet, a crash unlike no other? The answer, of course, depends upon to whom you speak. But couple that with all the unknown or unexpected variables that could come our way and the honest answer is: No one knows for sure.

With interest rates not forecasted to raise significantly anytime soon, CD savings rates close to rewarding pretty much  nothing, the stock market does look  as though it’s the only game in town for someone wanting to make a buck or two.

Then again, economic growth in US companies hasn’t exactly been anything to rave about, too many people are still unemployed and too many salaried individuals aren’t bringing home enough bacon to feed their family.  Additionally, the multitudes of those retiring —who can afford that luxury— are facing unforeseen financial challenges they never expected or planned for: Consequences the Fonz can’t fix even if that 62+ crowd that has enough equity in their homes and could get a reverse mortgage, would.

Where’s the bright spot in all of this on a date remembered with blackness? Perhaps in remembering that market crashes are often preceded by a number of red flags warning of the mess to come.

Believe it or not, Wikipedia has done a pretty good job of pointing out what events led up to the Crash of 1929. From that source:

•”The market had been on a nine-year run that saw the Dow Jones Industrial Average increase in value tenfold, peaking at 381.17 on September 3, 1929.

•On October 24 (“Black Thursday”), the market lost 11% of its value at the opening bell on very heavy trading.

•On October 28, “Black Monday”, more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38.33 points, or 13%.

•The next day, “Black Tuesday”, October 29, 1929, about sixteen million shares were traded, and the Dow lost an additional 30 points, or 12%…The volume of stocks traded on October 29, 1929 was a record that was not broken for nearly 40 years.”

•On October 29, William C. Durant joined with members of the Rockefeller family and other financial giants to buy large quantities of stocks in order to demonstrate to the public their confidence in the market, but their efforts failed to stop the large decline in prices. Due to the massive volume of stocks traded that day, the ticker did not stop running until about 7:45 p.m. that evening. The market had lost over $30 billion in the space of two days, which included $14 billion on October 29 alone.

•October 30, the Dow regained an additional 28.40 points, or 12%, to close at 258.47.

•The largest percentage increases of the Dow Jones occurred during the early and mid-1930s, but it would not return to the peak closing of September 3, 1929 until November 23, 1954.”

Back to October 29, 2013.

If there’s are lessons to be learned by black market days, in addition to the warning signs that are easily ignored when making money is on the table, here are two:

1.Forgetting that trees don’t grow to the sky.

2. And, while there’s no certainty that you’ll make money investing, one for-sure guaranteed fact is that sooner or later markets always correct.