Week of October 5, 2009

Boo!

October is always a scary time on Wall Street and La Salle Street. It started on October 24, 1929, Black Thursday and climaxed on October 29, Black Tuesday, when the stock market lost 13% in one day. By the time it was all over the market had lost 40% of its value between September and November and the Great Depression was underway. At it’s peak in 1933, US unemployment was near 25% and the lives of millions of people who had never owned a single share of stock were in tatters. The market itself did not get back to its September 1929 high of 381 until 1954.

In October of 1987, the Dow Jones Industrial Average lost 31% in just 5 days starting on October 14. On October 19 alone, the Dow lost a record 22% of its value. The “Crash of 1987″, however, was confined to Wall Street. Unemployment actually went down from 1987 to 1988 and there was little economic or political upheaval outside of the investment world. Many economists pointed to all the regulations and safeguards that came into effect after 1929, as the main reason that the damage was contained to Wall Street.

One year ago this week, the Dow had its worst week ever as measured in total points and percentage loss. The Dow lost over 1800 points for an 18% loss between October 6 and October 10, 2008. This followed a brutal September where the Dow had 3 of the top 10 losing days in its history. Measured from October 9, 2007 when the Dow made its all-time high of 14,164 to March 9, 2009 when the market closed at 6,547 the most recent crash saw the Dow lose an astonishing 53% of its value. We have seen a 3,000 point rally from the bottom, but this time it was impossible to shield the rest of the economy from Wall Street’s problems. Unemployment now stands at 9.8% and continues to grow.

There are two ways in which you can deal with these scary Octobers in the market:

1.- Liquidate all your assets, put all that cash in a box, then take your box and a shotgun and hide under the bed until you hear the last trick-or-treater leave your porch.

or

2.- Take our options course and learn how to protect your portfolio and even profit in a down market. You decide.