Sunday, May 21, 2006
Markets ‘are like 1987 crash’
A report by Barclays Capital says the run-up to the 1987 crash was characterised by a widening US current-account deficit, weak dollar, fears of rising inflation, a fading boom in American house prices, and the appointment of a new chairman of the Federal Reserve Board.
All have been happening in recent months, with market nerves on edge last week over fears of higher inflation and a tumbling dollar, and the perception of mixed messages on interest rates from Ben Bernanke, the new Fed chairman.
“We are very uncomfortable about predicting financial crises, but we cannot help but see a certain similarity between the current economic and market conditions and the environment that led to the stock-market crash of October 1987,” said David Woo, head of global foreign-exchange strategy at Barclays Capital.
Now that this has been recognized the market is free to rally. If a crash situation does materialize that should put a stop to the relentless rise in interest rates. But I wouldn't put any money on that just yet.
P.S. Mom is doing much better. Her pain in the ankle/lower left leg has been diagnosed as arthritis and she is taking ibuprofen to reduce swelling which has greatly relieved her pain. She just needs to avoid trying to catch people and to slow down on. There is always next season.