volatility before crash, page-45

Great chart earlier on the thread. The 1987 crash looks like an insignificant blip. Shows the 17 year waves very nicely too.

Barnsty, I had to laugh reading your refutation of the doom and gloom merchants here - I haven't seen a single one of those posts! I've been Ignoring everyone who comes out calling for further massive drops without any substantial argument.

This downturn seems to me very different from previous ones, because in 1929, 1974, 1987, Japan in the 80's, the tech bubble in 2000, all these crashes followed a period of "irrational exuberance", when P/E ratios were sky high. Tokyo was around 80 times earnings before it crashed, in 2000 many tech stocks had prices in the $100's even though they didn't have any earnings at all! In 1974 and 1929 similarly, P/E was very high. In 1929 there was a lot of other stuff going on at the same time. So fundamentals were out of whack prior to ALL of those incidents.


This time, the market has crashed because of some financial wizardry that went wrong. There was nothing fundamentally wrong with our market, or the economy. While perhaps a slowdown, or a 10% correction might have been justified last year, the 40%+ crash we've had seems to have come out of left field.

In the US there are serious issues, in need of structural adjustments. But nowhere else. The Europeans got sucked in by the Yanks, as usual, so they have imported a few problems also. But outside the US (even in Europe) the declines seem hugely over done, on a fundamental basis.

So in my view, this is purely a sentiment thing. Sentiment that has turned extremely negative. Thing is, sentiment can turn very rapidly, so once we hit bottom (hopefully that was yesterday), I believe we may bounce around for a few days, but I expect a very rapid and dramatic recovery.

I'm picking (at least) 5800 on the XAO by Christmas.