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Why Markets Crash in October

October 24, 2008 1:51 PM

Mayerowitz ABC News’ Scott Mayerowitz reports: What is it with October?

Is it the changing seasons, the diminishing sunlight or maybe just a desire to be back on the beach?

Whatever it is, October has historically been a bad month for the stock market.

October2_081024_main Today marks the anniversary of Black Thursday, the initial stock market crash in 1929 that eventually led to the Great Depression. (The two selloffs on Monday and Tuesday, Oct. 28, 1929 and Oct. 29, 1929, actually set off the panic.)

Then fast-forward to 1987. On Oct. 19 of that year, stock markets around the world crashed. On what became known as Black Monday, the Dow Jones Industrial Average lost 22.6 percent of its value.

Now to this October, as if anyone needs reminding. This month, the Dow has lost about 2,500 points, or 23 percent of its value amid a global financial crisis and economic slowdown. And there's still a week of trading to go.

So what is it about October?

“That’s a good question. It’s been asked before. Believe me, I don’t think I have an answer for you," Charles Geisst, a finance professor at Manhattan College, told me today. “I think it’s mostly coincidence."

Geisst, who has written several books about the markets, including “100 Years of Wall Street,” “Wall Street: A History” and “Undue Influence: How the Wall Street Elite Puts the Financial System at Risk,” thinks the Great Depression stigma might now perpetuate itself in some traders’ minds.

“The best I can say for it is that since 1929, there’s been a myth about October. And I think it’s more myth than anything else,” he said. “Maybe it’s Halloween or something approaching. I’m not sure. But it’s nothing serious. No.”

Well maybe history had some clues for us. After all, October was the month that the Great Fire of Chicago broke out in 1871. Hundreds were killed and another 90,000 were left homeless.

October was also the month -- in 1881 – when that most famous Western gunfights occurred: the shootout at the O.K. Corral.

Not that either of those events relates to the stock market and its gyrations.

So we then might have to turn to 1901, when on this day a 63-year-old schoolteacher named Annie Edson Taylor became the first on record to take the plunge over Niagara Falls in a barrel.

Plunge? Falls? A bit of a stretch? Probably, but it’s the best we could do.

It should be noted that October doesn’t always mean bad news for the stock market.

Look back just one year, when on Oct. 9, 2007 the Dow hit its all-time high close of 14,164.53, more than 40 percent above today's level.

October 24, 2008 | Permalink | User Comments (37)

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it's all psychology. The world looks very different in October from mid-August.

Posted by: Jason alexandridis | Oct 24, 2008 2:04:53 PM

Maybe its the MEDIA (Prophets/Shepards)! Certainly the media affects the markets(any day). They always try to report what is going on in investors minds or predict what the news will be tomorrow. Why? to say I told you so OR to provide guidance to all the "Sheep" in our heard.

Posted by: Alan Symcox | Oct 24, 2008 4:39:15 PM

The execs need to purchase new goatskin pants to dance around the ruins in. (hehehe)

Posted by: DobermanSpencer | Oct 24, 2008 5:42:00 PM

Ummm doesn't the fiscal year end in october. Certainly would have more to do with it than Holloween.

Posted by: dan lee | Oct 24, 2008 5:43:46 PM

This is stupid. It's because of third quarter profit reports are released, and by then companies show how far behind they are.

Posted by: want | Oct 24, 2008 6:46:24 PM

The combination of 3Q reports and seasonal affective disorder?

Posted by: Ann | Oct 24, 2008 7:00:04 PM

W.A.G. Stock markets crash in October to compete with ratings sweeps in T.V. Of course, this does not extrapolate backwards to 1929. But neither does this story. Or perhaps -- stock markets crash to coincide with Devils Night and Halloween. Could be that stock markets crash to coincide with Black Friday -- they day all PhD candidates who havent' made progress in their dissertations get kicked out ofof graduate school. In turn, they all get MBAs -- and suffering from post traumatic stress disorder -- have flash backs to Black Friday (in some schools it's Black Monday) and have major anxiety attacks - -and inevitably tell their therapists -- and well -- you know how therapists talk -- and thing you know consumer confidence in management flounders -- and boom -- the stock market crashes. Or -- anticipating Daylight's savings time clock set backs -- people sleep in and trading suffers. Maybe there is a power outage on the network? Ha Ha ha.

Posted by: Wisdom | Oct 24, 2008 7:30:06 PM

This is one of the most worthless "news features" I have ever wasted my time reading. The heading promises an answer. The content disappoints, tremendously. Shame on both the writer and his editors. If you have nothing of value to write, don't waste bandwidth.

Posted by: E.R. Murrow | Oct 24, 2008 7:48:57 PM

I want to know why we bailed out the banks when we should have bailed out all the people that had money in 401K's , retirement funds or IRA's first. Give us back our money. I want my money back!!!! And let us get out money out now without penalties!

Posted by: Renata Morgan | Oct 24, 2008 8:44:03 PM

I will be contacting many of the crooked and greedy executives to tell them that I want a cruise on the yacht or the jet plane that I'm paying for and they're continuing to enjoy. The bailout is absolutely absurd; the American taxpayers are being paying for the excesses of the greedy executives. Shame on Congress and the President, they're clueless.

Posted by: bill bernhardt | Oct 24, 2008 9:13:31 PM

I think it's related to the Christmas buying rush. A lot of businesses need to transfer large amounts of credit and money to pay for all those goods moving around suddenly in the fall. This puts strains on certain markets as huge sums are moved in and out. Some of that must affect the stocks. It's like the rush of waters and unexpected waves when the tide waxes and wanes.

Posted by: Reynold | Oct 24, 2008 9:43:32 PM

I got a pretty good idea why they're crashing this october.

http://market-ticker.org/archives/622-Fiscal-Cat-5-Hurricane-Warning.html

Posted by: kennedy | Oct 24, 2008 9:59:06 PM

I blame the media for all the crap that's going on in the world. Cant you ever tell a positive story? It would probably have a positive impact.

Posted by: kimberly | Oct 24, 2008 11:11:21 PM

dan lee thinks the fiscal year ends in October. UM? Which fiscal year?

Companies designate fiscal years, as does the US. Dan? Think it through, perhaps even research reality? The federal fiscal year does not end in October, but I'd be remiss to tell you a fact. You are not able to grasp truth.

Posted by: laroo | Oct 24, 2008 11:44:53 PM

Congress is so messed up right now. The speaker of the house says something, and the stock market drops 900 points. Didn't they know that if they probed Allen Green for what happened that he would eventually say anything, something and for all of that people listen and when I heard him say that the model was wrong...my immediate thought, oh well there goes the stock market...because congress screwed up by asking in front of the world, and Allen Greenspan answered. It happened. Congress asked.

Posted by: lotman3 | Oct 25, 2008 12:28:18 AM

Congress is so messed up right now. The speaker of the house says something, and the stock market drops 900 points. Didn't they know that if they probed Allen Green for what happened that he would eventually say anything, something and for all of that people listen and when I heard him say that the model was wrong...my immediate thought, oh well there goes the stock market...because congress screwed up by asking in front of the world, and Allen Greenspan answered. It happened. Congress asked.

Posted by: lotman3 | Oct 25, 2008 12:32:19 AM

Ironic 1 of 3:
We have now issured the biggest insurancse company in the world because they decided to venture out. The insurer is being insured by us, the tax payer and premiem payer to the insurer.

Posted by: lotman3 | Oct 25, 2008 12:42:54 AM

Ironic 2 of 3:
We are getting on to companys for not being forthright with stock holders but I just heard today that congress does not want to give out who they will back or bail out ahead of time because investers or stock holders might panic.

Posted by: lotman3 | Oct 25, 2008 12:45:16 AM

Ironic 3 of 3:
Allen Greenspan goes in front of congress and they ask "probed" him if there was something wrong about his model about the economy. They asked in order to find out about the problem. Then what "he" said creates a market meltdown. Congress probed in front of the world. Confidence and trust in our stock markets was not what congress was looking for. They were looking to vote into congress a democrate. That is so bad to take us taxpayers down to get themselves voted in.

Posted by: lotman3 | Oct 25, 2008 12:51:50 AM

I think it is the fact that Christmas is around the corner and everyone sells off their assets to finance their tango with Santa...

Posted by: Chris | Oct 25, 2008 2:47:22 AM

TORONTO, Oct 23 (Reuters) - Magna International said on Thursday its development of an electric hybrid car is on schedule for 2010, and it bolstered its efforts by buying a Michigan-based company that focuses on propulsion and energy management for electric vehicles.

It seems Australia is really stepping up to the plate when it comes to advancing alternative fuel technology. In fact, it was revealed yesterday that a US firm, Better Place, a California-based electric-vehicle company will be building an electric car charging network for them.

Posted by: 상율 한 | Oct 25, 2008 4:23:29 AM

It's obvious. Always happens under great Republican economic policies that never work.

Posted by: Tinker | Oct 25, 2008 4:33:03 AM

It looks to me like anything in October with the number(s) 9,19, or 29 is bad for finances. I'm sure glad there is no 39th day of October.

Posted by: Darken Handthumb | Oct 25, 2008 7:38:04 AM

Worthless article. ANY column with a title in the form of a question will not have an answer. Otherwise, the title would have been stated so. I usually skip them altogether.

Posted by: Imnotsayinganything | Oct 25, 2008 11:18:52 AM

Worthless article. ANY column with a title in the form of a question will not have an answer. Otherwise, the title would have been stated so. I usually skip them altogether.

Posted by: Imnotsayinganything | Oct 25, 2008 11:18:53 AM

If people would study, not just read, the Bible they would understand the reason. I can't go into the entire biblical explanation but I will give a few points to give you an idea. First, Allan Greenspan is Jewish and has controlled the monetary policy of the US and indirectly the world for over 20 years. He now admits he refused to investigate the derivatives market. That should tell you that he had something planned for the future. He knew what was coming. I could give many more examples along these lines. Now getting back to the October question. It coincides almost exactly this year with the Hebrew month of Tishri, the first month of the civil (finances) calendar and also the seventh month of the sacred calendar that begins in Nisan. Tishri is the month of the creation. Also the feast of Tabernacles (Ingathering - Thanksgiving - succotash from Sukkot) was from Oct. 14th to the 21st. The 22nd was the eighth day or the day of solemnity. We've just completed a Sabbatical year, 5768, when the cancellation and liquidation of debts really began the banking problems, and entering a Jubilee year (return to the possession of the promised land inheritance) Lev 25. All debts are canceled. Deut. 15 and Deut 31:9,10. I hope this gives you a clue as to why everything was planned by Alan for the month of October, I really mean, the month of this Jubilee year that began Rosh Hashanna 30 Sept (1 Tishri). Put the pieces of the puzzle together and you can understand why the Jews control the world and why our president's name is associated with " the burning "Bush" of the first Exodus. The second Exodus Isa 11:11. I'll stop for now. There is just so much information.

Posted by: jim | Oct 25, 2008 11:46:11 AM

Well my well just went dry.
My bank account is dry!
...I think it was SNL who did a scit on President Nixon. (Whom I like) Nixon was at a urinal and a man standing next to him asked about the poor people. The comic Nixon looked at him and said..."F///k the dooomed."

Mark Hillyard
(and I hope I recall the scit. My Brother thought it was a real interview which is funny all by itself.)

Posted by: Mark Hillyard | Oct 25, 2008 7:16:53 PM

October is when people experience the annual mid-life crisis. It's the time when they start wondering about their life, what it's about and where it's going.

The summer fun is gone. Time to get back to work. But why? Why do I have to do the same pattern again and again every single year? What am I doing with this? And then the thought of dark winter and the Christmas time sets in.

Christmas is supposed to be a happy family time but my family hates me because I'm too busy with work and don't show enough attention to them. Maybe there's more in life than just making money and going shopping everyday. OK, I'll just stop spending and start thinking less about money and more about the meaning of life. It's a process called life correction.

And when everybody starts having a life correction, we have a market correction, too.

If October is when the annual mid-life crisis occurs, Sunday evening is when the weekly mid-life crisis takes place, albeit a milder one.

chris g

Posted by: chris g | Oct 26, 2008 4:53:59 PM

McCain vs. Obama: Which Candidate Can You Afford? How Could the Next President Affect Your Financial Plan?

Voyant:

http://www.planwithvoyant.com

I am loving this tool. I created a better plan than my financial planner gave me. I fired him. I’m done with paper financial plans.

Posted by: Anne Chow | Oct 27, 2008 10:44:58 AM

Opinion...only....if everyone would turn off your televisions, radios, and stop looking at the newspapers..instead start listening to music and..and stop the panic....we would all be bettter off...the media is driving this frenzy....and remember, only bad news sells television time....

Posted by: barbara malm | Oct 27, 2008 1:54:20 PM

Fear of an Obama White House.

Posted by: razor | Oct 27, 2008 2:08:03 PM

It has to do with the futures markets on farm commodities. The harvest starts rolling in, and people get nervous about future prices.

Posted by: J. Parks | Oct 27, 2008 3:35:41 PM

McCain vs. Obama: Which Candidate Can You Afford? How Could the Next President Affect Your Financial Plan?

Voyant:

http://www.planwithvoyant.com

I am loving this tool. I created a better plan than my financial planner gave me. I fired him. I’m done with paper financial plans.

Posted by: Jim Tallby | Oct 29, 2008 2:42:19 PM

Probably Biblical. October is around the time of the Feast of Tabernacles during with the Year of Jubilee was also celebrated. It allowed for the return of property, cancelling of debts, etc which would stabilize the wealth. America does not comply with this Biblical concept. Wealth and debt concentrate to a breaking point. As usual though, most Americans think that because we are Americans, we are immune to the simple & practical laws given by God. So, here we are again. We are presented with the same choice, apply God's law and live, or disregard it and die. No doubt the next Depression will come first.

Posted by: Fred | Oct 30, 2008 5:24:50 AM

HILLARY CLINTON SAID:


SENATOR JOHN MCCAIN HAS A LFETIME OF EXPERIENCE THAT HE WILL

BRING TO WHITE HOUSE AND SENATOR OBAMA HAS A SPEECH HE GAVE IN 2002.


NO WAY. NO HOW. NOBAMA.

Posted by: HILLARY ENDORSMENT | Nov 2, 2008 2:04:49 PM

Hillary Lost To Obama And So Will McCain!!

Posted by: ZakD | Nov 3, 2008 6:16:11 PM

Up north the leaves are starting to fall off of the trees, and the end of summer is shot. No more barbecues, etc.. Apparently it is psychological.

Posted by: Doug | Nov 11, 2008 10:13:44 AM

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