History teaches us valuable lessons, and so did my father,
Irving Weiss. As a child in the second
decade of the 20th century, he endured the economic impacts of the worst
pandemic of recorded history. As a young man in the third decade of the
century, he witnessed the Crash of '29 and built a stellar reputation for
predicting the bear market, the banking holiday and the Great Depression that
followed. And as my mentor during the second half of the century, he helped me
predict the bond market crash of 1979, the stock market crash of 1987 and much
more.
It comes as no surprise to me — and, I presume, to you as
well — that history repeats itself: Despite differences in color and details,
events tend to follow patterns that are structurally and functionally similar.
What does come as a surprise, however, is the fact that all
of the shocking events I've mentioned so far began or peaked in the month of
October.
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Does that mean most Octobers bring dramatic change or that most
dramatic changes happen in October? No.
But it does make me stop and ask: Is there a cycle — or
combination of cycles — that, due to patterns deeply embedded in history, come
together in the tenth month more often than mere chance would dictate?
Consider some of the most salient Octobers of the 20th and
21st centuries, and then make up your own mind:
October 1907— Panic of '07.
A major bond offering by New York City fails ... the copper market collapses ... Standard
Oil is slammed with a massive $29 million fine for antitrust violations ... and
stocks plunge.
On October 22, Knickerbocker Trust, the second-largest trust
company in the United States, is forced to suspend operations, triggering an
especially intense wave of fear on Wall Street plus massive cash withdrawals
from New York banks.
The U.S. Federal
Reserve does not yet exist. But J.P. Morgan steps in to play the role of lender
of last resort, injecting liquidity into financial markets by buying up bonds,
orchestrating multimillion loans, and preventing a wholesale collapse in the
economic system.
October 1912 — Balkan War, prelude to World War I. Exactly
five years later, it's Europe's turn to plunge into crisis, leading to the
First Balkan War.
The Ottoman Empire has been encouraging Muslim populations
of Bosnia to join the Empire and move to districts of northern Macedonia to
restore the number of Muslims in the region. Meanwhile, Muslim immigrants join
Albanian Muslims in a series of uprisings.
Peter the First of Serbia issues a declaration in support
for Serbian and Albanian Christians living under Ottoman rule, declaring that
his army will "join the Holy War to free our brethren." Soon
Montenegro, Bulgaria, Serbia and Greece declare war on the Ottomans.
The events foreshadow World War I, ultimately claiming the
lives of more than 16 million soldiers and civilians.
October 1918— influenza pandemic. This is the deadliest
month of the deadliest pandemic in history, with a record 195,000 Americans
succumbing to influenza in just 31 days. Before it's all over, 50 to 100
million people are killed and 500 million are infected worldwide.
October 1922— fascism in Italy. On October 25, Benito Mussolini
celebrates the close of his Fascist Party Congress in Naples. On October 27, he
embarks on his historic March of the Blackshirts on Rome. On October 28, he
seizes power. And on October 29, he's named Foreign Minister, Interior Minister
and Prime Minister of Italy.
October 1923 — German hyperinflation. Prices in Germany are
rising at the most rapid pace of almost any month in history, driving the value
of the German mark down to more than four trillion to the dollar. Making matters
worse, separatists and communist movements in Germany spread to Bavaria and
Saxony. "World's highest standard of living" billboard is backdrop
for historic soup line of just a few years later.
October 1929 — Crash of '29. This month delivers more than
just the Black Thursday of October 24, when the Dow loses 11% of its value.
It's also the month of Black Monday (October 28, when the Dow falls 13%) ... and of Black Tuesday of October 29 (Dow
down 12%) ... followed by the deepest bear market in U.S. history.
October 1936. Spanish Civil War, prelude to World War II.
With Hitler's backing, Francisco Franco is proclaimed Generalissimo of the
National Army and Head of State. It is a pivotal event in the Spanish Civil
War, which, in turn, is a sneak preview of World War II in Europe.
October 1938. Hitler's first major armed expansion. German troops
occupy the Sudetenland, the Czech region inhabited by 3 million ethnic Germans.
By October 10, the region is fully under Nazi control.
Seven years later, the end of World War II ushers in a long
era of global stability. But in 1971,
Nixon abandons the gold standard and effectively devalues the U.S. dollar,
setting the stage for rampant inflation in the United States and a collapse in
the value of the U.S. dollar.
October 1978 — dollar panic. This month brings the panic
climax of the dollar collapse. In this one single month, the U.S. dollar index
loses more of its value than any month in history.
October 1979 — bond market collapse. U.S. Treasury bond
prices suffer their worst collapses in history, as Fed Chairman Paul Volcker
imposes Draconian measures in a desperate — but ultimately successful — attempt
to kill the inflation monster that has plagued the U.S. for nearly a decade.
Separately, the Soviet Union prepares to invade Afghanistan.
October 1984 and October 1986 bring two major U.S. government
shutdowns under President Reagan.
October 1987 — Crash of '87. The 19th is Black Monday — a
Dow plunge of nearly 25%, its worst single-day percentage decline in history and
nearly double the crash recorded on Black Monday 1929.
Among the key forgotten preludes to the stock market
disaster: a 50% collapse in crude oil prices a year earlier.
October 1994 — Russian ruble collapse. In just one day, October
11, the Russian ruble falls 27% against the U.S. dollar. It reflects the Russian government's "Shock
Therapy" economic policies, spurring
massive inflation, wiping out the savings of millions of citizens and
catapulting Russia into a deep
depression — the same kind of crisis that drives President Vladimir Putin to shocking actions more than two
decades later.
October 1997 — Dow mini crash. On the 27th day of the month,
the Dow suffers a 554-point plunge, wiping out more than $663 billion in market
capitalization.
October 2001 — America's longest war. When the Taliban government
in Afghanistan refuses to extradite Osama bin Laden, the U.S. and the U.K.
launch Operation Enduring Freedom, beginning the longest war in U.S. history,
still raging today.
October 2008 — global market Armageddon. The IMF warns that
the entire world's financial system is "on the brink of systemic
meltdown" as the world's stock exchanges experience some of their worst declines
in history. (See last Monday's edition for timeline.)
The crisis is so threatening that the U.S. Federal Reserve
and all major central banks around the world embark on a radical, history-smashing
escapade of rampant, nearly nonstop monetary easing and money printing, the
consequences of which are still unknown.
Back to the Present
Most people associate the term "Black October" with
a stock market crash. But as you've seen from these many historical examples, the
financial markets are only one of several focal points where the forces of
history can strike.
Others include currency markets, key centers of geopolitical
conflict, and the U.S. government itself, each playing pivotal roles in setting
the course of history.
I repeat: It would be
an overstatement to say that the month of October itself is the critical force
behind these events. But it would also be a mistake to assume that October of
2015 has so far been uneventful. Quite to the contrary, this month has already
delivered.
Official recognition by the U.S. Federal Reserve of the grave
risk of global collapses and upheavals. In fact, they specifically stated in
their FOMC meeting notes released last Thursday that the risks are so great,
they dare not raise interest rates from zero despite overwhelming monetary
arguments to do so.
Official IMF recognition of a global slowdown. In its latest
report, the International Monetary Fund says the global economy is slowing
almost across the board — in Europe, Japan and emerging markets. Moreover, the
IMF argues that companies in emerging markets have over-borrowed by $3 trillion,
risking a new global financial crisis.
America's most disappointing employment report since the
Great Recession. (See "Jobs Disaster
Confirms This Economy is in BIG Trouble.")
Russia's air, naval and ground attacks in Syria. It's their
first-ever armed intervention outside of the former Soviet Union since their
invasion of Afghanistan in 1979. Not only is this a massive escalation of a
four-year Syrian civil war, but, for the
first time since the Cold War, it thrusts the United States and Russia onto opposite sides of the
same battlefield.
A shocking escalation in the Afghanistan civil war. A
resurgent Taliban, already controlling vast regions of the country, take
Kunduz, the first major city to fall since the U.S.-led invasion of October
2001. Even if U.S. and government forces can retake and hold Kunduz, they are
doing little to prevent the fall of other provincial capitals now under fierce
Taliban attack.
Leadership turmoil in the U.S. House of Representatives.
While on the brink of major budgetary battles, suddenly no unifying leader
steps up to assume the pivotal role of Speaker of the House.
What will happen in the remaining three weeks of October remains
to be seen. But even if the stock market rallies, don't let that cloud your
judgment. Brace yourself for a series of events before year-end that could
shape the course of history for years to come. Good luck and God bless! Martin
Comments
I am
not counting on a 31,000 Dow, but if Martin thinks so, it could happen.
Norb
Leahy, Dunwoody GA Tea Party Leader
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