{"id":521056,"date":"2017-07-12T21:14:21","date_gmt":"2017-07-12T21:14:21","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=521056"},"modified":"2017-07-12T21:14:21","modified_gmt":"2017-07-12T21:14:21","slug":"the-tripwire-on-the-next-black-monday-2","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=521056","title":{"rendered":"The Tripwire on the Next \u201cBlack Monday\u201d"},"content":{"rendered":"
<\/a><\/div>\n

By Brian Maher<\/a><\/span> <\/p>\n

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This post The Tripwire on the Next \u201cBlack Monday\u201d appeared first on Daily Reckoning.<\/p>\n

\u201cBlack Monday\u201d \u2014 Oct. 19, 1987 \u2014 the bloodiest one-day carnage in market history\u2026<\/p>\n

The Dow plunged 508 points that hell-mouth day \u2014 an unthinkable 22%.<\/p>\n

A similar stock market event today would spell a 4,724-point cataclysm.<\/p>\n

We liken that October day in 1987 to the ancient Battle of Cannae\u2026 when invincible Rome lost as many as 70,000 legionnaires to Hannibal’s armies \u2014 in a single day.<\/p>\n

Or July 1, 1916, the first day of the Battle of the Somme, when nearly 20,000 British soldiers fell before the German guns\u2026 and never got up.<\/p>\n

What could lead today’s market to its own Cannae, its own Somme\u2026 another Black Monday?<\/p>\n

Today we set aside our renowned optimism\u2026 enter into the spirit of doom\u2026 and consider one possibility.<\/p>\n

Harley Bassman is a world-class expert in derivatives \u2014 what Warren Buffett has termed \u201cweapons of mass destruction.\u201d<\/p>\n

Bassman’s taken the current market and put it under his microscope.<\/p>\n

He specifically wanted to answer:<\/p>\n

The only question one cares about, identifying the tripwire that would tip our system into disequilibrium.<\/p>\n

That is, what could turn a bad day on Wall Street into another Black Monday-level event?<\/p>\n

And is there a specific point when the the dominoes could start going over?<\/p>\n

Turns out there might be.<\/p>\n

But before revealing that (black) magic number, let us identify the villain of this fellow’s tale, a possible trigger for the next event\u2026<\/p>\n

It’s a suspect we’ve also recently identified: record-low market volatility.<\/p>\n

A typical portfolio might normally contain 60% stocks and 40% bonds.<\/p>\n

Bonds are generally considered safer than stocks.<\/p>\n

But market volatility has been so low lately, many stocks seem as low-risk as a three-month Treasury.<\/p>\n

This despite a softening economy, rising interest rates, rising geopolitical tensions, etc.<\/p>\n

Note the diverging paths between global economic uncertainty and market volatility in this chart:<\/p>\n<\/p>\n

This record-low volatility has led investment funds to overshift their holdings away from bonds\u2026 and toward stocks.<\/p>\n

All is well as long as peace is abroad and rainbows appear in the skies over Wall Street.<\/p>\n

But if volatility spikes, if a storm whips up, all those funds that fattened on stocks will drop them quick as a wink.<\/p>\n

Then the selling could feed and feed and feed upon itself\u2026 until there’s nothing left to eat.<\/p>\n

That’s what led to Black Monday in 1987.<\/p>\n

It began as just another down day\u2026<\/p>\n

But once the market dropped below a critical threshold that October day, the computers caught a collective fever and unloaded everything in sight at the speed of electrons \u2014 hence the single-day 22% plummet.<\/p>\n

As this Bassman fellow explains the dynamic:<\/p>\n

Once a destabilizing event occurs\u2026 [it leads to] a feedback loop where asset selling begets more selling. This\u2026 exacerbated (but did not start) the 1987 crash.<\/p>\n

Or as Jim Rickards describes:<\/p>\n

In a bull market, the effect is to amplify the upside as indexers pile into hot stocks like Google and Apple. But a small sell-off can turn into a stampede as passive investors head for the exits \u2026read more<\/a> <\/p>\n

Source:: Daily Reckoning feed<\/a><\/p>\n

The post <\/a>The Tripwire on the Next \u201cBlack Monday\u201d<\/a> appeared first on Junior Mining Analyst<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Brian Maher This post The Tripwire on the Next \u201cBlack Monday\u201d appeared first on Daily Reckoning. \u201cBlack Monday\u201d \u2014 Oct. 19, 1987 \u2014 the bloodiest one-day carnage in market history\u2026 The Dow plunged 508 points that hell-mouth day \u2014 an unthinkable 22%. A similar stock market event today would spell a 4,724-point cataclysm. We […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/521056"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=521056"}],"version-history":[{"count":0,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/521056\/revisions"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=521056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=521056"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=521056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}