Just How Bad Was October 2008?

Not too shabby a week — plus 11% across the major indices, with some areas even stronger. Of course, that comes from deeply oversold levels, with stocks peak trough down 27% within October. The key question going forward is whether or not this past week’s snapback rally has legs. But rather than guess about that, let’s look at some of the more intriguing data points from October 2008.

I picked a bad month to stop sniffing glue:

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EQUITIES:

• October was the worst month for the Standard & Poor’s index of 500 stocks in 21 years — since the 1987 stock market crash. (NYT)

• The Dow dropped 14% drop over the past four weeks — the biggest October decline since 1987, when the crash sent markets down 23% for the month. The S&P 500 was down 17%, and Nasdaq fell 18%. This ranked as the 15th worst monthly decline for the Dow Industrials since 1900.

1101bizchartsc1.gif • Global equities in October shed $9.5 trillion. (Barron’s)

• October 2008 was the most volatile in the 80-year history of the S.& P. 500. (see NYT chart, at right)

• We had the most down days in a single month since August 1973. (Marketwatch)

• Compare 3 recent SPX Bear Markets: -46% from October 2007; Compare that with 1973-74 down 48% over 23 months. The 2000-03 bear was 49 percent over nearly 3 years.

• The S&P 500 had the most volatile month since November 1929 (1% moves higher or lower).

• October had two days where the indices were up more than 9% — the 10th time this has occurred over the past 80 years. (NYT)

• During an eight-day losing streak at the beginning of the month, the Dow lost 2,396 points.

• Consider days with 4% moves up or down: None from 2003 through 2007; Three throughout the 1950s and two in the 1960s. October 2008? 9 days with four percent plus or minus. That edges out September 1932’s record of 8. (NYT)

• The Dow had its second-biggest point drop on record, of 733 points.  The Dow posted two of it biggest point gains, climbing by 936 points (October 13th) and 889  (October 28th)

CURRENCY:

• US dollar gained 14.3% against the euro, 22.3% against the Canadian dollar, and 31.8% against the Australian dollar.  This is the fourth best month on record (using data going back to 1967).  March ’91, November ’78, and October ’82 are the only three months where the US Dollar saw bigger gains. (Marketwatch)

BONDS:

• Perhaps the credit crisis is finally easing: Overnight Libor dropped to its lowest levels in 6 years, falling to 0.73125%, down from 5.09% on October 9th. (Bespoke)

COMMODITIES:

• Copper and Crude oil had their worst one-month losses ever (Barron’s)

• Crude-oil futures lost one third of their value, falling 33% during the month. This was their biggest monthly percentage drop since trading began in 1983. Average retail price for gasoline fell 31%, ($2.504 a gallon), down 14% from a year ago.

• Gold lost 18% for the month — its worst monthly drop since 1980.

• Wheat had its largest monthly decline in 22 years; Copper and Aluminum had their largest drop in more than 20 years; Sugar for its biggest monthly fall in a decade. (WSJ)

GLOBAL BOURSES:

• Emerging-market bonds popped 8% over Treasurys — a six-year high.

• Market cap losses: Standard & Poor’s global indexes lost $6.79 trillion (September’s 2008 lost $3.4 trillion)

• European stocks rose 12% (Dow Jones Stoxx 600 Index) — their biggest weekly gain since 2001. (Bloomberg)

• MSCI Emerging Markets Index fell nearly 30% — the worst month since August 1998. Thats a loss of about ~ $900 billion. (Marketwatch)

• Japan’s Nikkei 225 hit a 26-year low.

• Iceland’s exchange crashed 81% for the month.  (Marketwatch)

• Russia had the world’s most volatile index, with 17 days with of more than four percent moves in the Micex index. For the month, the Micex lost 28.8%, but had a weekly gain of 42.5%. (NYT)

• Argentina’s Merval and Brazil’s Bovespa indexes were set to make their biggest one-month percentage losses since August 1998, with the Merval falling 37% and the Bovespa losing 25%.

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Source: So how bad was October? One for the history books Laura Mandaro & Nick Godt MarketWatch, Oct. 31, 2008 http://tinyurl.com/5p7mdl

OVERNIGHT LIBOR AT LOWEST LEVEL IN YEARS Bespoke Investments, October 30, 2008 http://bespokeinvest.typepad.com/bespoke/2008/10/overnight-libor-at-lowest-level-in-years.html

A Monthlong Walk on the Wildest Side of the Stock Market FLOYD NORRIS NYT, October 31, 2008 http://www.nytimes.com/2008/11/01/business/01chart.html

European Stocks Post Biggest Weekly Rally Since 2001 Michael Patterson Bloomberg, November 1 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=a.QaMNs7UGxk&

Commodities Take Hit in Month TOM SELLEN WSJ, NOVEMBER 1, 2008 http://online.wsj.com/article/SB122544101179287615.html

MONTHLY PERFORMANCE FOR OIL, DOLLAR, DOW Bespoke Investments, October 31, 2008 http://bespokeinvest.typepad.com/bespoke/2008/10/monthly-performance-for-oil-dollar-dow.html

Deflated Expectations DEBBIE CARLSON Barron’s COMMODITIES CORNER  NOVEMBER 3, 2008 http://online.barrons.com/article/SB122549287954389335.html

Stocks Gain as Brutal Month Ends Michael S. Derby and Howard Packowitz WSJ, OCTOBER 31, 2008, 10:36 P.M. http://online.wsj.com/article/SB122544813555487665.html


Originally published at The Big Picture and reproduced here with the author’s permission.

5 Responses to "Just How Bad Was October 2008?"

  1. NakedShortSqueezer   November 2, 2008 at 8:47 am

    I just listened to Barry on financialsense this week. He is a funny guy. Thanks Barry, you are a trip. Markets have completed 3 of 5 down, still waiting for the next shoe to drop us below 2002-2003 lows. Then on to the lows of the early 90’s? Next supercycle bull most likely around 2014.Inflation vs Deflation debate: inflation is increased supply of money, but, deflation is defined by money coming out of commodities and into bonds. Fed follows the bond traders, 3 month t-bills. Fed will punish anyone short the dollar and bonds. fed will fight deflation by increasing money supply hoping it will go into equities and commodities, but the other end is monetizing debt, money goes into bonds and we get more deflation. Falling interest rates further erode bank capital, more money to service the debt. Deflationary.It is all over but the shouting, Greater Depression is here.

    • nedhead   November 2, 2008 at 7:59 pm

      I’m a finance dummy OK. Would someone please tell me why the dollar is so strong and Gold is going down in price? I just don’t get. Thank you

      • Guest   November 2, 2008 at 9:45 pm

        Deleveraging. Firms that bought mortgage-backed securities have seen them crater, and as that occurs, they must roll over dollar-denominated debts that they originally incurred in order to buy those securities. But, they can’t get credit because their MBS collateral is now trash. So, they have to pay down the dollar-denominated debt. This creates demand for dollars. They get those dollars by selling down their assets, some of which are denominated in other currencies (e.g., the euro). Since they need dollars, they convert those euro and other currency amounts received from sale of said assets to dollars, which dumps euros on the foreign exchange in exchange for dollars, driving down the euro and driving up the dollar. Since the dollar is going higher, everything priced in dollars is worth less, ceteris paribus, including gold. Gold also derives part of its value from its role as a commodity (e.g., for jewelry) and in a depression demand for commodities goes down. So that is why the dollar is up and gold is not up.

        • Dan Herkes   November 3, 2008 at 6:08 am

          Thank you

      • hagelstein   November 10, 2008 at 8:44 am

        You state “Since the dollar is going higher, everything priced in dollars is worth less”. What about supply and demand? The supply of dollars and gold has not changed, only the perception of the US dollar’s value. The irony here is that fiat currency, the US dollar, is worth more than gold, even though there is technically an unlimited supply of US dollars compared to the limited supply of gold. I guess because our worldwide system is so US-dollar oriented.