1987 Stock Market Crash Example of Increasing Risks in Investing
October 19, 2010

Biggest Single-Day Market Drop in History Oct 19 1987

On This Date in History:   After a run-up in the Dow Jones industrial average over the past several weeks that put it in positive territory by some 8% for the year, it took a tumble.  The Dow gave back about 1.5%, or 165 points to close as session that saw the big board showing a deficit well over 200 before the close.  Profits have been up for a large number of companies during the most recent “earnings season” but the Dow took a hit anyway.  The general consensus is that China raising its interest rates was the catalyst.  With a rise in Chinese interest rates, that economy may slow down and so the dollar got stronger.  The dollar rose 1.7% and commodities, including oil, fell.  Oil had been up about 13% over the past month, mainly due to a weakening dollar.  Since most commodities, including oil, are traded in dollars then when the dollar gets weaker the price of commodities rise.  Earlier this year when there was the European fiscal crisis, the dollar rose and oil prices fell.  When the crisis seemed to pass, then the dollar got weaker against other commodities and oil prices rose.  So, it would appear that, at the current time, the Dow Jones and other indices such as the S&P 500 are responding to currency exchange rates.  I think the volatility in the face of positive earnings reports just shows how nervous the investing class is at this time.

Media Hype in 1987 Proved Unfounded

However, Wall Street is not as nervous as it was 23 years ago when, on this date in 1987, the Dow Jones industrial average fell 508 points.  It became known as “Black Monday,” though its seems that moniker has been used in some form in the past.  That represented a decline of over 22% in one day of trading.  For a similar shock to happen today, the Dow would have to fall about 2400 points in one day.  Back in 1987 on October 19, the S&P 500 fell over 20% so it was a broad sell off of stocks.  The date marked the end of a bull market that had driven the Dow from 776 points in August 1982 to a high of over 2700 points in August 1987.  There was great concern in the media that we were in the midst of another potential 1929 scenario but the market said otherwise.  The very next day, the market had its biggest gain ever when it rose over 100 points and two days later rose 186 points.  By 1989, the Dow had recovered all it had lost on that one day and continued to rise for many years thereafter.  In comparison, the largest single day point drop for the Dow Jones happened on Sept 28, 2008 when it fell 778 points but that represented only a 7% decline.

Thousands lost jobs on Wall Street After 1987 Crash

So often, we hear that the market is a forecaster of the days to come so many experts thought the crash meant that it was the sign of a new recession.  The fallout though turned out to be relatively minimal.  Now, it certainly was a recession for the 15,000 folks on Wall Street who lost thier jobs, but the rest of the economy wasn’t overly affected. An easy answer to simply say that the Dow had risen about 300% in 5 years and people simply took their money off the table.  That is certainly true and probably was an incentive to sell at the first time of trouble.  Still,  it’s not totally clear of the cause, though there are numerous opinions.  However,  there seems to have been a number of factors that had more to do with a changing trading envrionment and new technology than anything else. 

Traders in a Frenzy like in this photo from 1987 may be a thing of the past with the increase in computer trading

It’s as if it was a hiccup in a transition from the old world to the new.  The Brady Commission, formally known as the Presidential Task Force on Market Mechanisms, determined that the failure of stock markets and derivatives markets to operate in sync was the major factor behind the crash.  Several sources put the blame on the then relatively new practice of using computer programs to initiate trades.  The idea is that when certain conditions were met, computers used by large, institutional investors sold large quantities of stocks and a waterfall effect followed suit.  Only trouble with this argument is that markets that did not use computers also dove.  But, it seems to me that if traders on other markets saw the Dow tanking that maybe panic would set in.  Another finger has been pointed at the lack of liquidity of the market.  Traders were unable to handle the large number of trade orders that came in and trading was halted for many stocks.  While it clearly was a problem it doesn’t explain why so many people decided to sell at once.  The bond market at the time featured yields that had risen from 7.6% to over 10% and that provided a nice haven for folks investing in the equity market but those rates did not rise overnight.  Perhaps it provided for a nice alternative and may have encouraged nervous investors who found it a lucrative place to park their tidy profits, but it doesn’t explain the everyone overboard scenario.

Politicians Have Gotten Involved With The Economy for Years

So, a look at what might have happened in preceeding days that may have caused people to collectively decide the party was over might be useful.  Many historians look to consideration by Congress of the Smoot Hawley Act as the cause for the crash in 1929 followed by an extension of doldrums when Herbert Hoover actually signed it.  Now, from October 14, 1987 to October 19 1987, the Dow lost about 30% of its value so the decline really started a few days before the bottom fell out.  It just so happens that on October 14, 1987 US Secretary of the Treasury James Baker announced that there may be a need to follow a weak-dollar policy as part of a larger scheme to stablize global currencies.  That announcment may have influenced foreign investors to pull out of dollar denominated assets.  Then, on October 15 the House Ways and Means Committee passed legislation that eliminated tax deductions by corporations on debt used for corporate takeovers.  Securities and Exchange Commission economists Mark Mitchell and Jeff Netter pointed exactly to that legislation as the underlying cause of the crash in their 1989 published report. 

People Take Different Approaches to "Playing" The Market Though Wise, Prudent Investing May Be the Best Course of Action..But It Can Be Boring

One this is for certain, investing in markets is not a simple proposition and it becomes more complicated every day.  The more we advance in technology, the more new concerns arise and new rules or limitations get considered.  The more the world gets intertwined in the business of economics, the more events in other parts of the world affect the markets at home.  Then there are the traditional risks of interest rates, exchange rates, market risk and just plain the risk involved with the specifics of any underlying company.  The stock market is not for everyone but the more people get involved in markets through their pensions or 401K’s the more markets volatility directly affects individuals.  But, most people assume that the market just goes up and their 401K is always going to grow and that is not the case.  If you want a guarantee, get a toaster.  Better yet, brokers and financial advisors are charged with recommending investments that are suitable to their clients needs, desires and sophistication.  I would submit that most folks who lose money have not been advised properly.  Many of the former employees of Enron were misled into believing that their company stock was a sure bet.  No doubt, many people let their own greed get in the way, preferring to believe that there is a quick way to make a buck as opposed to taking a more prudent way to invest.  One thing I found that is wrong with our markets is that so many people see the market as a horse race or a casino.  They don’t invest in a company but instead bet that it will go up.  Day traders could care less about the company’s long term viability and are more interested in short, quick gains or losses.  They get in or get out by buying and selling or selling short and closing out the position.  That is especially true of options  traders.  That attitude has spilled over into commodity markets where people buy and sell contracts to purchase and underlying commodity, like oil, with no intention of ever taking delivery on that contract.  The bottom line is we have many examples of the complexities of the markets and it would be wise to learn the rules of the game before you jump into the pool.  Its not for the faint of heart.

JP Morgan Rejects GM’s Pleas, the Company Thrives; Morgan Bails Out GM, The Founder Lost His Job
September 16, 2010

who_would_jesus_bail_out

Nice Guess

Nice Guess

On this Date in History: I read an article from the Wall Street Journal from January of 2008. It read that oil prices were around $90 a barrel and were expected to remain around that level. It had a quote from a learned man who said, at that time,  that he expected the price of oil  to drop to about $67 a barrel.   While he didn’t put a time qualifier on the statement,  about 6 months after this artcle came out the price of oil was over $140 a barrel.  I related this story to one of my classes and one student said that it sounded like someone sucks at their job. The point is we often hear these great ideas and pontifications from “experts” that turn out to be wrong by a long shot, if not completely opposite of reality.

Durant Was No Quitter

Durant Was No Quitter

At the dawn of the 20th Century,  animal power remained much of the energy that drove the economy, though certainly not as much as at the turn of the 19th Century.  Aside from the railroads, animal power was particularly necessary for transportation and for agricultural interests. A United States Senator, Chauncey Depew, said with full confidence that “nothing has come along to beat the horse.”  He suggested to those who might invest in alternative forms of transportation to “keep your money.” Now, one who is looked up to as one who had a great financial mind and who was quite savvy in investing was J. P. Morgan. Well, Morgan had a chance to get into the automobile business in 1908 when he was approached by William Crapo Durant for a loan. Durant and Benjamin Briscoe wanted financing for the proposed merger of their two fledgling automobile companies, Buick and Maxwell-Briscoe. Durant told Morgan that automobile sales would reach a half million per year. Upon hearing Durant’s prediction, one of Morgan’s partners sniffed, “If he has any sense, he’ll keep such notions to himself.”

Depew Left Holding the Horse Shovel

Depew Left Holding the Horse Shovel

Well, the deal didn’t go through and Briscoe is left to the asheep of history. But Durant soldiered on without any backing of financiers and formed a holding company on this date in 1908 with $2000 and without J.P. Morgan. Instead, he sold shares of stock and raised about $12 million in a couple of weeks. He called it General Motors. He acquired Olds Motor Works later that year, then subsequently bought Cadillac, Pontiac (originally known as Oakland), Cartercar, Ewing and Elmore. But, in 1910, Durant was in a tight financial situation and he turned to competitors of Morgan for help. Durant apparently used the financing to continue to acquire other companies. That led to more problems but, by then,  automobiles were getting popular enough that I suppose JP Morgan had changed his mind.   Around 1920, General Motors found itself with $30 million in debt and huge obstacles ahead. Durant went back to Morgan and Pierre du Pont who were two giants of the financial world. The financiers saved the company but effectively finished off Durant at GM. See, part of the deal was that Durant was out and du Pont took over as President. But, don’t feel too bad for Durant. He’s one of those guys who never quit, following the advice of the old gridiron sage, Granville Hambright who often told his Junior High football players that “a winner never quits and a quitter never wins.”    Durant went on to found a new company. You might have heard of it…Chevrolet.

Sloan: Father of Modern Corporation?

Sloan: Father of Modern Corporation?

Dupont served as President of GM until 1923 when he turned the reigns over the Alfred P. Sloan who focused his attention on managing the company more effectively. Ever wonder why there are new models to cars every year? It was Sloan’s idea. How about the different pricing structure of different brands in the company? That was Sloan too. By the late 1920′s, GM passed Ford as the leader in automobile sales.  For his company,  Henry Ford  focused his attention on more efficient manufacturing instead of management, marketing and finance. Later in the 20th century, GM became the largest corporation in the world…a title it later lost and did so in quite a spectacular fashion.

Ford Legacy: Don't Give Up Control

Ford Legacy: Don't Give Up Control

Some interesting aspects of this story. First off, it took the geniuses like Morgan a dozen years to figure out that a visionary like Durant was right all along. Durant had the vision but he didn’t have the know-how regarding making his dream come to fruition. What is interesting is that Henry Ford rebuffed the attempts of outside financiers to take over Ford Motor Company when things turned tough in the Depression. Yet, General Motors has an early history of near disaster before they got it right.

gm__cracked_logoAt the first part of the 20th century, General Motors needed help and so they went to private financial institutions for that help. When they were denied, founder Durant figured out a way to move ahead while some of his competitors went by the wayside. Then additional help came in the form of the previously reluctant Morgan. Ford probably worked with Morgan on a number of deals, but none with the expressed intent of saving the company. In fact, in the early 1920′s when Ford faced potential bankruptcy, Henry Ford turned down financing from big investment houses who required that Ford turn over control of the company, like Durant did. In the early 21st century, it’s deja vu. But, this time, General Motors turned to the Federal Government (taxpayers) to get saved and private investors (stock holders, bond holders) ended up with the short end of the stick. Instead of financiers like du Pont taking control of the company, the government fired the head of GM. Meanwhile, Ford did not take government money and continues to move forward and maintain control of the company, in the same tradition of the company’s founder, Henry Ford.   While Ford Motor Company in late 2010 still had about $27 Billion in debt, it had reduced its debt by $4 Billion, had positive cash flow and the outlook for Ford looks bright in some circles with some analysts project Ford having more cash than debt by 2012.  But, be careful, those are just “expert” opinions and remember, Morgan’s experts thought that the automobile was a loser investment 100 years earlier.  What a difference a century makes. In some ways, not one bit. In other ways, a huge difference.

Weather Bottom Line:  We got the light rain in the morning but it doesn’t look like it will help advance the notion of rain, let alone thunderstorms on Thursday evening or afternoon.  It’s just too stable an atmosphere and that’s too bad because we need the rain.  This was our big chance and it wasn’t too good to begin with.  Look for a pleasant Friday with a return to hot, but relatively dry, conditions for the weekend into early next week.

Once Upon a Time, General Motors Didn’t Get a Bailout
September 16, 2009

who_would_jesus_bail_out

Nice Guess

Nice Guess

On this Date in History:  I just read an article from the Wall Street Journal from January of 2008.  It read that oil prices were around $90 a share and were expected to remain around that level.  It had a quote from a learned man who said that he expected the price of oil at that time to drop to about $67 a barrel.  Now, he didn’t put a time qualifier on the statement but just about 6 months after this artcle came out, the price of oil was over $140 a barrel.  My student said that it sounded like someone sucks at their job.  The point is we often hear these great ideas and pontifications from “experts” that turn out to be wrong by a long shot, if not completely opposite of reality.

Durant Was No Quitter

Durant Was No Quitter

At the dawn of the 20th Century, animal power remained a large part of the energy that drove the economy.  Particularly when that involved transportation.  A United States Senator, Chauncey Depew, said with full confidence that “nothing has come along to beat the horse.”   He suggested to those who might invest in alternative forms of transportation to “keep your money.”  Now, one who is looked up to as a great financial mind who was quite savvy in investing was J. P. Morgan.  Well, Morgan had a chance to get into the automobile business in 1908 when he was approached by William Crapo Durant for a loan.  Durant and Benjamin Briscoe wanted financing for the proposed merger of their two fledgling automobile companies, Buick and Maxwell-Briscoe.  Durant told Morgan that automobile sales would reach a half million per year.  Upon hearing Durant’s prediction, one of Morgan’s partners sniffed, “If he has any sense, he’ll keep such notions to himself.”

Depew Left Holding the Horse Shovel

Depew Left Holding the Horse Shovel

Well, the deal didn’t go through and Briscoe is left to the asheep of history.  But Durant soldiered on without any backing of financiers  and formed a holding company on this date in 1908 with $2000 and without J.P. Morgan.  Instead, he sold shares of stock and raised about $12 million in a couple of weeks.   He called it General Motors.  He acquired Olds Motor Works later that year, then subsequently bought Cadillac, Pontiac (originally known as Oakland), Cartercar, Ewing and Elmore.  But, in 1910, Durant was in a tight financial situation and he turned to competitors of Morgan for help.  Durant apparently used the financing to continue to acquire other companies.  That led to more problems but  I suppose that automobiles were getting  popular enough that JP Morgan changed his mind.  Around 1920, General Motors found itself in $30 million in debt and huge problems ahead.  Durant went back to Morgan and Pierre du Pont, two giants of the financial world.  The financiers saved the company but effectively finished off Durant at GM.  See, part of the deal was that Durant was out and du Pont took over as President.   But, don’t feel too bad for Durant.  He’s one of those guys who never quit, following the advice of the old gridiron sage, Granville Hambright.  He went on an founded a new company.  You might have heard of it…Chevrolet.

Sloan: Father of Modern Corporation?

Sloan: Father of Modern Corporation?

  Dupont served as President of GM until 1923 when he turned the reigns over the Alfred P. Sloan who focused his attention on managing the company more effectively.   Ever wonder why there are new models to cars every year?  It was Sloan’s idea.  How about the different pricing structure of different brands in the company? That was Sloan too.  By the late 1920′s, GM passed Ford as the leader in automobile sales and Henry Ford had focused his attention on more efficient manufacturing instead of management, marketing and finance.  Later in the 20th century, GM became the largest corporation in the world…a title it later lost and did so in quite a spectacular fashion. 

Ford Legacy: Don't Give Up Control

Ford Legacy: Don't Give Up Control

Some interesting aspects of this story.  First off, it took the geniuses like Morgan a dozen years to figure out that a visionary like Durant was right all along.  Durant had the vision but he didn’t have the know-how regarding making his dream come to fruition.  What is interesting is that Henry Ford rebuffed the attempts of outside financiers to take over Ford Motor Company when things turned tough in the Depression.  Yet, General Motors has an early history of near disaster before they got it right. 

gm__cracked_logoAt the first part of the 20th century, General Motors needed help and so they went to private financial institutions for that help.  When they were denied, founder Durant figured out a way to move ahead while some of his competitors went by the wayside.  Then additional help came in the form of the previously reluctant Morgan.  Ford probably worked with Morgan on a number of deals, but none with the expressed intent of saving the company.  In fact, in the early 1920′s when Ford faced potential bankruptcy, Henry Ford turned down financing from big investment houses who required that Ford turn over control of the company, like Durant did.  In the early 21st century, it’s deja vu.  But, this time, General Motors turned to the Federal Government (taxpayers)  to get saved and private investors (stock holders, bond holders) ended up with the short end of the stick.  Instead of financiers like du Pont taking control of the company, the government fired the head  of GM.   Meanwhile, Ford did not take government money and continues  to move forward and maintain control of the company,  in the same tradition of the company’s founder, Henry Ford. 

What a difference a century makes.  In some ways, not one bit.  In other ways, a huge difference.

Rain Mainly South Thu Evening

Rain Mainly South Thu Evening

Weather Bottom Line:  The other day I told you about the inverted trof to the south and the front to the north and I opened up the possibility that the front might sag farther south and, if it did, our rain chances would not be so good.  Well, that’s the story.  While we may have a errant shower or two, particularly to the south, rain chances probably won’t get to anything worthwhile until the second half of the weekend when a storm system from the southwest may lift at least toward our way.  Hey, it’s September….one of the driest months in Louisville annually.

Some Data Suggest Economy Not Worst Since Great Depression…Not Yet
July 15, 2009

Year                        Unemployment rate
1923-1929              3.3
1930                         8.9
1931                         15.9
1932                         23.6
1933                         24.9
1934                         21.7
1935                         20.1
1936                         17.0
1937                         14.3
1938                         19.0
1939                         17.2
1940                         14.6
1941                          9.9
1942                         4.7

 

 

 

 

 

 

 

 

I recent months, we have constantly been told that this is the worst economy since the Great Depression.  The Dean of the University of Texas business school said so in March President Obama said so in September during his presidential campaign and continues to say so today.   If you look at a few key indicators, one may question that assessment. Professor Lee McPeters takes exception to the notion.

But, when one looks at the unemployment rate numbers from the years just after the 1929 crash, we find that they rise to an average rate of 8.9 in 1930 and top out at 24.9 in 1933. (as per the BLS) It stays above 20% through 1935 and then remains in the mid to upper teens until World War II.  Our most recent unemployment rate was pegged at 9.5% which is far less than the era of the Great Depression.  However, when one looks at more recent historical numbers, we find that the current unemployment rate reflects more accurately with the early 1980′s. In 1982, the avg rate for the year was 9.7% and in 1983, 9.6% of labor was unemployed.  For the 8 years of President Clinton’s administration, the unemployment rate was 5.2%.  During the GW Bush administration, the average unemployment rate was 5.3%,

Beginning Date           Ending Date           Dow Industrials          Loss
    ————–               ————-             ——————              —-
Sep.  3, 1929               Jul.  8, 1932             381.17  to   41.22     -89%
Mar. 10, 1937         Mar. 31, 1938             194.40  to   98.95     -49%
Nov. 12, 1938           Apr.  8, 1939             158.41   to  121.44     -23%
Sep. 12, 1939           Apr. 28, 1942             155.92   to   92.92     -40%
Jan. 11, 1973             Dec.  6, 1974          1051.70  to  577.60    -45%
Sep. 21, 1976           Feb. 28, 1978          1014.79  to  742.12     -27%
Apr. 27, 1981           Aug. 12, 1982         1024.05   to  776.92     -24%
Aug. 25, 1987           Oct. 19, 1987         2722.42   to 1738.74     -36%
Jul. 16, 1990              Oct. 11, 1990         2999.75   to 2365.10     -21%

If we take a brief look at the stock market crash of 1929, we find that the market’s initial jolt was a loss of 89% from late 1929 to mid 1932.  For the current environment to be on par with that time frame, if we consider a market high in 2007 of a 14164 Dow Jones, then the Dow would have to fall to 1558 to equal the malaise.  Midday on July 15, 2009 the Dow stood around 8500.

Dow Jones 1974-June 30 2009

Dow Jones 1974-June 30 2009

1929 Crash...Forecast or Simply History?

1929 Crash...Forecast or Simply History?

 The most recent bear market had a low of 6547 which means the drop from the 14164 high was about 54%.  Now, the Dow had a rebound after the 1929-1932 bear market ended and it rose to at least 194 by 1937, from which time the Dow took another 49% tumble.  The rebound is often referred to as a “false peak” because the apparent recovery in the economy as indicated by the Dow rising 373% from the 1932 low to the 1937 high.  Our current rise from the 6547 low is about 30%.  Earlier in the year, the rebound was more like 40%.  So, the question will be, is our current rise just another “false peak” or is there a real recovery. 

 

GDP percent change based on current dollars

GDP percent change based on chained 2000 dollars

     
     

1930

-12.0

-8.6

1931

-16.1

-6.4

1932

-23.2

-13.0

1933

-4.0

-1.3

1934

17.0

10.8

1935

11.1

8.9

1936

14.3

13.0

1937

9.7

5.1

1938

-6.2

-3.4

1939

7.0

8.1

1940

10.0

8.8

1941

25.0

17.1

1942

27.7

18.5

1943

22.7

16.4

1980

8.8

-0.2

1981

12.2

2.5

1982

4.0

-1.9

1983

8.7

4.5

2004

6.6

3.6

2005

6.3

2.9

2006

6.1

2.8

2007

4.8

2.0

2008

3.3

1.1

The 2008 GDP numbers are a bit misleading because the last two quarters showed contraction with a substantial 4th quarter contraction of the GDP over 6% with the first quarter of 2009 contracting by 5.5%, based on 2000 dollars.  The contraction of the economy as a percentage of GDP is definitely more pronounced than in the late 1970′s and early 1980′s if you only look at the last two quarters and compare it to the annual GDP.  But, you can’t do that. It’s comparing a full year to a couple of quarters.  For instance, the second quarter of 1980 saw a GDP fall of 7.8%, which is greater than any of the past 3 quarters.  It was bad timing for President Carter because he was trying to get re-elected.  Bad timing because the total change in GDP for that year was just 2 tens of one percent.  So, the story is still being written as to how well this recession compares to the early 1980′s.  But, the GDP change for the entire year of 1930 was negative 8.6% followed by -6.4% in 1931 and then a huge contraction of 13% in 1932.  We’ve had two quarters with a 6% and 5.5% decline. 

All of this points to a recession comparable to the late 1970′s and early 1980′s.  The comparison to the Great Depression is simply a tough argument to make, at this point.  I truly hope, as I think everyone does, that politicians will not be able to accurately say that we are in the worst condition since the Great Depression.  Many people have blamed the depression on Herbert Hoover.  Others blamed the deep recession of the late 70′s and early 80′s on Jimmy Carter.  Could this be the reason why the media and politicians choose Republican President Hoover’s legacy instead of Democrat President Jimmy Carter’s?  Or is it more because from a PR standpoint, the Great Depression is something that every one knows about.  Maybe its more attention getting or sexy to talk about the Great Depression instead of a simple recession.  But, regardless of the reasoning, many aspects of the current situation cannot credibly be compared with the depression and more accurate reporting by the media and proclamations by policians would be that it is the worst in 30 years.

 

SPC Convective Outlook Thu 8am to Fri 8am

SPC Convective Outlook Thu 8am to Fri 8am

Weather Bottom Line:

  Today we have a classic situation with a storm coming out of the plains, dragging up warm front.  Clouds and showers with a few t’storms are in the cards but all of the clouds and such should suppress any big storms.  But, the warm front will draw up warm, moist, unstable air behind it so that will set the stage for Thursday as the cold front approaches.  It’s a pretty strong cold front with highs behind it for Friday and the weekend in the upper 70′s and low 80′s.  I would think that we would have a reasonably good chance for t’storms and possibly strong storms on Wednesday afternoon or evening.

DAY 2 CONVECTIVE OUTLOOK 
   NWS STORM PREDICTION CENTER NORMAN OK
   1252 AM CDT WED JUL 15 2009
  
   VALID 161200Z – 171200Z
  
   …THERE IS A SLGT RISK OF SVR TSTMS FROM PORTIONS OF THE
   CENTRAL/SRN PLAINS EWD INTO THE TN/LOWER OH VALLEYS…AND THEN NEWD
   INTO NY/PA…
  
   …SYNOPSIS…
   UPPER TROUGH OVER THE WRN GREAT LAKES WILL DEEPEN SEWD THU FROM THE
   MID MS/TN VALLEYS EWD INTO THE CAROLINAS…AS THE UPPER RIDGE BUILDS
   NWD ACROSS THE INTERMOUNTAIN WEST. THE GRADIENT BETWEEN THESE
   SYSTEMS WILL RESULT IN STRONG FLOW ALOFT…40-55 KT AT 500 MB…WITH
   NWLY WINDS FROM THE NRN ROCKIES SEWD INTO KS/OK…AND WLY/SWLY WINDS
   FROM THE MID MS/TN VALLEYS NEWD THROUGH THE OH VALLEY AND INTO THE
   NORTHEASTERN STATES. COLD FRONT ASSOCIATED WITH THE UPPER TROUGH IS
   FORECAST BY LATE THU AFTERNOON TO EXTEND FROM NY SWWD TO NEAR THE
   AR/MO BORDER…AND THEN WWD TO THE CO/NM BORDER.
  
   …KS/OK/NEB SEWD INTO SRN MO/AR…
   CLUSTERS OF STORMS MAY BE ONGOING AT THE START OF THE PERIOD ACROSS
   THE OZARKS AND WRN CENTRAL PLAINS DUE TO LIFTING ASSOCIATED WITH
   SEPARATE LOW LEVEL JETS. WHILE THESE STORMS ARE EXPECTED TO BE
   ELEVATED…STEEP MID LEVEL LAPSE RATES MAY SUPPORT A HAIL
   THREAT…ESPECIALLY WITH THE CENTRAL PLAINS STORMS. HOWEVER…BOTH
   CLUSTERS OF STORMS ARE LIKELY TO INTENSIFY AND BECOME SURFACE BASED
   LATER IN THE DAY AS THEY SHIFT SEWD AND ENCOUNTER A
   WARMING/DESTABILIZING AIR MASS. OTHER STORMS SHOULD ALSO DEVELOP
   NEAR THE FRONTAL BOUNDARY BY LATE AFTERNOON AS STRONG HEATING
   WEAKENS CAPPING INVERSION. ONCE SURFACE BASED STORMS DEVELOP…THE
   COMBINATION OF MODERATELY STRONG INSTABILITY AND EFFECTIVE SHEAR AT
   30-40 KT WILL BE FAVORABLE FOR SEVERE STORMS. GIVEN THE STRONGLY
   VEERING WIND PROFILES AND NWLY FLOW ALOFT…THE DEVELOPMENT OF MCS/S
   WITH COLD POOLS APPEAR MOST LIKELY…WITH WIND DAMAGE THE GREATER
   THREAT…ESPECIALLY DURING THE AFTERNOON/EVENING HOURS.
  
   …LOWER OH/TN VALLEYS NEWD INTO NY/PA…
   AS UPPER TROUGH AMPLIFIES…HEIGHTS WILL GRADUALLY LOWER AND
   TEMPERATURES COOL ALOFT ACROSS THE REGION. ONCE TEMPERATURES WARM
   INTO THE 80S…MODERATE INSTABILITY WILL DEVELOP WITHIN MOIST AIR
   MASS LOCATED AHEAD OF THE COLD FRONT. ALTHOUGH WINDS ABOVE THE
   BOUNDARY LAYER WILL BE MOSTLY WLY/WSWLY…SPEED SHEAR WILL PROVIDE
   SUFFICIENT DEEP LAYER SHEAR TO SUPPORT ORGANIZED STORMS.  EVEN
   THOUGH MODELS VARY ON THE COVERAGE OF STORMS…THE AMOUNT OF
   INSTABILITY AND COOLER TEMPERATURES ALOFT SHOULD SUPPORT SOME SEVERE
   HAIL. HOWEVER…THE DEEP UNIDIRECTIONAL WIND PROFILES APPEAR MOST
   FAVORABLE FOR LINE SEGMENTS AND WIND DAMAGE. SINCE STORMS WILL BE
   DIURNALLY DRIVEN…THEY SHOULD DIMINISH QUICKLY AFTER SUNSET.
  
   ..IMY.. 07/15/2009

Jim Morrison Conspiracy Theories Rival Those of Michael Jackson; The Wall Street Witch; General Washington
July 3, 2009

 
Lizard King Still Walking the Earth With Elvis?

Lizard King Still Walking the Earth With Elvis?

 Independence for the big Door:

Morrison Shrine/Grave

Morrison Shrine/Grave

Jim Morrison died in a Paris bathtub on this date in 1971. He officially died of heart failure though a drug overdose was suspected. Just like with the conspiracy theories concerning the recent death of Michael Jackson, some of which suggest Jackson’s death was a fake,   almost immediately claims that Morrison really wasn’t dead hit the news.  Had there been a world wide web, I’m sure that the blogosphere would have been going wild.  Many conspiracy theorists floated the idea that Morrison was tired of his fame so he faked his own death.   That was the one that I always heard but there are a bunch of Jim Morrison conspiracy theories out there.  There was even a notion that the J. Edgar Hoover led FBI had him knocked off in an effort to stop the hippie movement.  I think his grave is some sort of haven or shrine for those who…well…I don’t know what they do or think. You can take the Jim Morrison Grave Tour on the web if you like.

On This Date In History:  Hetty Green died on this date in 1916. Who is Hetty Green? Why the Witch of Wall Street! Seems kinda sexist to call a rather ornery rich woman a “witch” when rich old coots might be called “tough” or “hard nosed.” Anyway, she is said to have learned to read the financial pages at age 6. She inherited a million dollars from her father at age 30. At that point, she became quite shrewd as she bought Civil War Bonds when others thought it was a bad investment. She made a mint. Basically, she took her million inheritance and increased it 100 fold. But, she was rather odd in that she lived like a pauper. Supposedly, Hetty married so that her heirs would be her children and not other relatives that she didn’t care for. She kept an office in a bank from which she negotiated a rent free lease. She moved from hotel to hotel to avoid paying property taxes. Hetty had a son and a daughter and when her boy hurt his leg in a sledding accident, she took him to a charity hospital. Well, hospital personnel recognized her and demand that she pay. She refused and decided to treat the child’s injured leg herself. He ended up losing the leg. She forced her children to eat as she did, which was ham sandwiches. Some call her thrifty, others a miser or the Witch of Wall Street. She is but one of a list of eccentric wealthy Americans.  Hetty died on this date in 1916 of a stroke suffered while arguing with a maid over the price of milk!! Can you imagine what she would be like with today’s rising prices?

Wonder if Hetty's Dog Was Toto?

Wonder if Hetty's Dog Was Toto?

Don’t worry, The Who may have been aware of the story because the Kids Are Alright. Hetty left each child $50 million. The more famous J.P. Morgan was worth a reported $70 million and her wealth equaled that of Henry Ford. In 2008 dollars, her fortune would have been near $2 Billion.

See what happens when you watch your pennies? She may have been a witch, but she was probably the wealthiest witch Wall Street had ever seen. Here’s a Forbes list of early wealthy Americans.

On This Date In 1775, Virginia planter and former British officer George Washington strode before the Continental Army, drew his sword and formerly took command as General of the Armies. While some opposed his appointment, he was chosen because of his leadership and because, as a Virginian, it was hoped he could bridge the differences between the southern colonies and those in New England. Washington had accepted the appointment two weeks prior under the stipulation that he not be paid except for reimbursement of expenses.
I Think The General Liked This Painting

I Think The General Liked This Painting

While he is called the “father of the country” I think much is lost regarding Washington. He was quite remarkable and he really set the tone for the nation today. After he led the defeat of the most power nation on earth, Washington had all of the power. He had political power and the loyalty of the army. Other men in his position might have seized the reigns of power in the nation. There was some fear he may strike up a dictatorship. But he voluntarily gave up his sword and returned to Virginia. In 1787, the fledgling nation called again and he took the position of President of the Constitutional Convention. It is said his quiet resolve was inspiring to the delegates as they argued and compromised over a document that would last the ages. He was elected as the first President and won an overwhelming re-election. He could have served another term but instead, voluntarily gave up power for a second time.
FDR Broke Washington Tradition

FDR Broke Washington Tradition

Until Franklin Roosevelt, no one broke the two term tradition, though US Grant came reasonably close to gaining a third consecutive term. The two term tradition became a point of law following the passage of the 22nd Amendment to the Constitution which was ratified in 1951. If you think about it, that is the general tone of the nation. How many other nations in history have conquered as much territory and defeated so many nations in battle and then voluntarily given up the spoils? Again, I take you to his farewell address of 1796 in which you can see all of the wisdom poured forth for the nation he helped to build. Washington died in 1799 from what most think was a cold or the flu….though there is speculation that he would have lived except for the practice of bleeding a patient. Washington himself may have been the cause of his own demise as he supposedly urged the doctor to let him bleed after the doctor was going to close the wounds. Speculation is that Washington bled to death. Here is the text of George Washington’s  farewell address, that is often quoted and paraphrased, in case you missed it before. Look for all of the items that would apply today and also look for his interesting take on religion in society.

Weather Bottom Line:  Really not much change in the story line for the Fourth of July weekend.  Today will be great with tons of sun and a high in the mid 80′s.  A low will be ejecting out of the southwest and get up to say, Memphis on Saturday.  That should be sufficient to throw over some moisture and create some isolated t’storms in the afternoon.  The short makes its closest approach on Saturday evening and that is when t’storm activity will have its greatest risk.  I intimdated that the SPC might widen its slight risk area and they have done so such that Louisville is barely in the risk region.  As I said previously, not a slam dunk for strong storms but not totally out of the question.   There will be clouds sticking around on Sunday with the risk for rain probably being greatest in the first half of the day.   As the long wave pattern continues to slowly shift, we should be out of the influence of the Great Lakes trof that brought us such cool weather the past few days and a slight ridge will start building in.  There’s a chance for a shortwave to come through the flow on Monday perhaps bringing a t’storm chance then, but otherwise, the signature of next week will be our afternoon temperatures moving back into the upper 80′s.
DAY 2 CONVECTIVE OUTLOOK 
   NWS STORM PREDICTION CENTER NORMAN OK
   1257 AM CDT FRI JUL 03 2009
  
   VALID 041200Z – 051200Z
  
   …THERE IS A SLGT RISK OF SVR TSTMS FROM THE UPPER OH VALLEY INTO
   THE SRN PLAINS…
  
   …THERE IS A SLGT RISK OF SVR TSTMS OVER ERN PARTS OF WY AND CO…
  
   …SYNOPSIS…
   QUASI-STATIONARY UPPER LOW OVER THE LOWER GREAT LAKES IS FORECAST TO
   PERSIST INTO SATURDAY…WITH AMPLITUDE OF THE ERN US LONG WAVE
   DIMINISHING.  THIS WILL RESULT IN BROAD WNWLY FLOW ALOFT ACROSS MUCH
   OF THE US FROM THE NRN/CENTRAL INTERMOUNTAIN REGION TO THE ATLANTIC
   COAST…DOWNSTREAM FROM AN UPPER RIDGE AXIS OVER THE INTERMOUNTAIN
   WEST. 
  
   AT THE SURFACE…A LOW IS FORECAST TO MOVE ESEWD ACROSS THE MID MS
   VALLEY TOWARD THE UPPER OH VALLEY BY THE END OF THE PERIOD…WITH A
   TRAILING COLD FRONT MOVING SWD ACROSS THE OZARKS AND INTO THE SRN
   PLAINS. A QUASI-STATIONARY FRONT WILL EXTEND EWD FROM THE LOW. 
  
   …MID MS VALLEY INTO THE OH VALLEY…
   AN MCS IS EXPECTED TO BE ONGOING AT THE START OF THE PERIOD OVER
   PARTS OF NRN MO…ERN IA AND NRN/CENTRAL IL.  THE CONVECTIVE SYSTEM
   WILL BE PRIMARILY ELEVATED TO THE NORTH OF THE SURFACE LOW AND
   QUASI-STATIONARY FRONT…MAINTAINED BY STRONG LOW LEVEL CONVERGENCE
   AND WARM ADVECTION LIFT NEAR THE NOSE OF A 50 KT SWLY LOW LEVEL JET.
   GIVEN THE BACKGROUND 35-45 KT MID LEVEL WINDS AND RESULTANT STRONG
   VERTICAL SHEAR…THERE IS POTENTIAL FOR A FEW SEVERE STORMS TO OCCUR
   IN THE SRN PART OF THE MCS DURING THE MORNING…ALTHOUGH WEAK
   INSTABILITY SHOULD LIMIT THE OVERALL SEVERE THREAT.  STORMS MAY
   INTENSIFY BY LATE MORNING/EARLY AFTERNOON AS STRONG DIURNAL HEATING
   OCCURS ALONG THE SRN EDGE OF THE CONVECTIVE CLOUD SHIELD OVER PARTS
   OF THE MID MS VALLEY AND UPPER OH VALLEY.  CONTINUED FAVORABLE
   LOW-LEVEL AND DEEP LAYER SHEAR WILL ENHANCE STORM ORGANIZATION AND
   INTENSITY…AND MAY COMPENSATE FOR WEAK MID LEVEL LAPSE RATES ACROSS
   THE AREA.  DAMAGING WIND GUSTS AND HAIL WILL BE POSSIBLE WITH
   STRONGER STORMS…WHICH SHOULD DIMINISH AFTER 03Z.
  
   …SRN PLAINS INTO THE OZARKS…
   AIR MASS IS EXPECTED TO UNDERGO SUBSTANTIAL DIURNAL HEATING AHEAD OF
   THE ADVANCING COLD FRONT…AND WHEN COUPLED WITH SURFACE DEW POINTS
   IN THE 60S TO LOW 70S…WILL RESULT IN MLCAPE OF 1000-2000 J/KG.
   STRONG HEATING WILL GRADUALLY WEAKEN THE CAP DURING THE
   AFTERNOON…AND LOW-LEVEL CONVERGENCE ALONG THE FRONT WILL PROMOTE
   DEVELOPMENT OF SCATTERED THUNDERSTORMS.  ALTHOUGH MID LEVEL
   WINDS/DEEP LAYER SHEAR WILL BE MODEST AT BEST…LARGE
   TEMPERATURE/DEW POINT SPREADS ASSOCIATED WITH A RELATIVELY DEEP
   MIXED LAYER…AND DRIER AIR IN THE MID LEVELS WILL CONTRIBUTE TO
   LARGE DCAPE VALUES INDICATIVE OF ENHANCED DOWNDRAFT INTENSITY AND
   THREAT FOR DAMAGING WIND GUSTS.  THERE WILL ALSO BE A THREAT FOR
   LARGE HAIL WITH STRONGER CELLS.  SEVERE THREAT IS EXPECTED TO SPREAD
   SWD ALONG THE FRONT AND ASSOCIATED OUTFLOW BOUNDARIES THROUGH THE
   EVENING HOURS.
  
   …ERN PARTS OF WY AND CO…
   WEAK UPSLOPE LOW LEVEL WINDS ARE FORECAST TO DEVELOP OVER THE ERN
   SLOPES OF THE ROCKIES ON SATURDAY AS A WEAK SURFACE RIDGE MOVES INTO
   PARTS OF SD AND NEB.  THIS WILL MAINTAIN SURFACE DEW POINTS IN THE
   LOW 50S…AND CONTRIBUTE TO AN UNSTABLE AFTERNOON ENVIRONMENT WITH
   MLCAPE AROUND 1000-1500 J/KG.  THUNDERSTORMS ARE LIKELY TO DEVELOP
   OVER THE HIGHER TERRAIN DURING THE AFTERNOON AND MOVE EWD/ESEWD INTO
   THE HIGH PLAINS WITHIN A BAND OF 25-35 KT MID LEVEL FLOW.  DEEP
   LAYER SHEAR WILL BE SUFFICIENT FOR ORGANIZED STORMS TO
   DEVELOP…INCLUDING A FEW SUPERCELLS CAPABLE OF PRODUCING LARGE HAIL
   AND STRONG WIND GUSTS THROUGH THE EVENING HOURS.
  
   ..WEISS.. 07/03/2009
 
7/3 SPC convective outlook for 7/4/09

7/3 SPC convective outlook for 7/4/09

Something of Interest in the Tropics; Yanks Take Ryder Cup; Current Financial Situation Not Unprecedented
September 22, 2008

Gotta Like A Tatooed Guy Named Boo Signaling for a First Down on the Links

Gotta Like A camouflage wearing Guy Named Boo Signaling for a First Down on the Links

for hurricane ike damage photos and video, CLICK HERE and scroll down. Many of the slideshows update daily.

Last Friday, Snow White and I went on an excursion to Springfield, KY just because our power was still out (we got it back Sat. Night@8:49 pm…nearly a week after we lost it) and we both had the idea at the same time. So, we blew off our sculling expedition for the day and tootled down the road listening to my Sirius radio. As I heard updates on the Ryder Cup, it occurred to me that the US team would win simply because everyone said that they would lose and because of guys like Boo Weekley, JB Holmes, Anthony Kim and Kenny Perry as well as the other names not at the tip of the tongue of most casual golf fans. I had thought that perhaps if they lost, it would be because one of the stars failed miserably. Well, I’ll take credit for my fearless forecast and you can get a little local perspective by linking to THIS WEBSITE FOR A LOUISVILLE VIEW OF THE RYDER CUP WEEKEND. Its not something that you will find on most national websites.

If you didn’t get any rain this weekend, and you probably didn’t, then you are out of luck for much of the week ahead. At the end of the week, there is some indication that an area of low pressure will move into the SE from the Atlantic. At this time, it does not appear to be tropical in nature but its not totally unreasonable to think that could change. More significantly, many models show it moving onshore and continuing inland. At this time, it does not appear that it would get close enough to us to bring rain though some of the data try to bring it close enough that perhaps we can hold out some hope…not enough to put in the forecast…but something to consider as the week progresses. There is another system, currently called Invest 93.

Invest93 Spaghetti Model 0921 18Z

Invest93 Spaghetti Model 0921 18Z

Invest 93: There was some indication through the weekend that the tropical

Invest93 Spaghetti Model Intensity Graph 0921 18Z

Invest93 Spaghetti Model Intensity Graph 0921 18Z

disturbance south of Puerto Rico could develop into a depression. Well, when the boys with the Hurricane Hunters flew out for a looksee, it was over Puerto Rico. Land, aerial and satellite observations suggest that winds may indeed be around depression level but that the circulation is not defined enough to warrant it being classified as a depression. However, the spaghetti models all indicate a track with a northerly component that would take the storm back over the water. The bad news is that 10 of the models make it a hurricane. The good news is that most do not take it to the East Coast…though if the current tracks hold…and they’ll probably change…then New England may be a concern.

Can it Happen Again?

Can it Happen Again?

One must consider that On This Date in History, Sept 22, 1938 New England and specifically Long Island were reeling from the Great New England Hurricane aka The Long Island Express which was a hurricane that came off of Africa wandered through the Bahamas and then north…the forecasters of the day thought it would turn out to sea. Most of the time at that far north latitude the coriolis force turns storms to the right. But…there was a big fat high in the Atlantic that would not allow such a turn. It did aid in the acceleration so the result was that Long Island got nailed by a Category 3 hurricane moving at 70 mph. 600 people in New England died. (here is more on the Long Island Express in 1938) Now, I am in no way suggesting that this guy will be a repeat or even that it will indeed even be a hurricane. What I am suggesting is that it has happened before and it had nothing to do with Global Warming. Just like it is tenuous at best for anyone, regardless of their expert credentials, to claim that Katrina had anything to do with Global Warming. Funny how when people try to make that claim they neglect to mention Hurricane Camille in 1969.

Uncle Sam's Savior?Speaking of things that have happened before…On This Date in 1907…The United States was in the midst of an economic crisis. At that time, there was no central bank or Federal Reserve. There had been some doofus who tried to corner the copper market and when that failed, all of the banks who made loans to back the scheme were in trouble. They started calling other loans. People lost confidence in the banks as several failed. A bailout was needed. At the time, President Theodore Roosevelt was claiming that everything was in great shape and was threatening a federal takeover of all trusts. Who comes to the rescue but J. Pierpont Morgan. He got together with his banking brethren and convinced them that they needed to work together to salvage the system in order to save all of their hides and the future of the nation. He also convinced the Secretary of the Treasury to pony up $25 million to the effort. The recession did not turn into a depression and the event led directly to the eventual establishment of the Federal Reserve. While the numbers are not as large…not the $700 billion to $1.2 Trillion being tossed around this time, the other numbers are not as large either. The Dow Jones Industrial Average fell 39%. We recently lost and gained less than one percent and politicians are running around trying to make comparisons to the Great Depression. In order to equal the fall of the 1907 panic, then a Dow of 11,400 would have to fall to 7000. So, while this is serious and potentially catastrophic and far reaching, the solution is not totally unprecedented. It’s just that before it was JP Morgan engineering a bailout with some government help and this time its the Federal Reserve and Uncle Sam engineering a bailout with some other private help. When you hear also of rumors that today’s problem was a plot by those who stand to profit, keep in mind that in 1907 it was rumored that the banks had caused the whole panic just to line their pockets.

Sometimes, news people say they need to give commentary to “give perspective” or a particular news event. Dan Rather used to defend journalists providing analysis instead of just reporting for that specific reason. Yet, it helps if those giving “analysis and perspective” had some perspective in the first place.

Here are some more articles relating to JP Morgan and the panic of 1907.

JP Morgan-Savior-The Panic of 1907

JP Morgan

Bear Stearns Bailout as it relates to JP Morgan in 1907 Panic

Panic of 1907

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