Early this morning, the Dow reached an interesting number as the market has now fallen over 1000 points from its all-time highs reached in May of this year. And while this decline represents only a 5% drop in the market over the past three months, it is eerily similar to what took place just eight years ago when a 1000 point drop from the previous all-time high led to a stock market crash the very next year, and ushered in a liquidity and credit crisis that we have yet to fully recover from.
From 18,351.36 on May 19th, The Dow (cash) is now at 17,345… – Zerohedge
Much of the charge behind the declines of the past three months have been led by Apple and a myriad of Bio-tech stocks… which just also happened to be the catalysts for the rise in May to a new all-time high. But as earnings have come up short for companies over the past two quarters, and credit and currency volatility leading the bond markets to crater throughout the summer, it is not surprising that a liquidation of equities are needed to help cover margin calls in other asset classes.
Perhaps the scariest part of this recent decline in the DOW is that it is very similar to what took place in 2007, and just months before the historic crash that would end the lives of both Bear Stearns and Morgan Stanley. And as so many analysts have predicted a major economic event to take place in either September or October, signals such as those found in the German Bund, and now in U.S. equity markets, provide ample warning that investors need to shore up their accounts now, or find themselves repeating the same failures most people endured for three years following the 2008 crash.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.