fortuitous friday, page-20

The time congruities being pointed out by a number of people between 1987 and 2012 share patterns are interesting. Are they any more than that?

Here are some fundamentals to ponder.

In 1987, the SP500 was up nearly 40% in the first three quarters.

In 2012, the SP500 peaked at 16.6% for the year.

In 1987, the P/E for the SP500 after it crashed was 14.37.

In 2012, the P.E for the SP500 is currently at 14.28.

In 1987, the yield expected from stocks was just a little below the risk free rate
being offered by government bonds.

In 2012, the yield on the SP500 is expected to be about 7.7%. The interest on 10-Year Government Bonds is 1.8%

So - while there may be congruities in times, congruities in fundamentals are absent. Let's go on.

One of the key elements precipitating the 1987 Crash, and little noted, was the fact that the House Ways and Means Committee, on 15 October, eliminated the deductibility of interest on debt used for corporate takeovers.

The stampede into stocks in 1987 was largely a takeover boom. Junk bonds were the medium for that activity. Remember Michael Milken and Drexel Burnham Lambert? The viability of takeover activity was wiped away by the House Ways and Means Committee when they eliminated deductibility of interest on the debt being used to fuel the activity. Somebody yelled fire - and there was a rush for the exits.

On fundamental grounds, there is little similarity between the American market of 1987 and 2012.

We may have a correction. But a crash of epic 1987 proportions - it seems doubtful, unless a Black Swan appears on the horizon.

Redbacka