October 2008: Worst Month Ever?
Interesting observation earlier this week from Dan Greenhaus, with the Equity Strategy Group of Miller Tabak + Co:
Prior to yesterday's big rally, October 2008 saw the S&P down 27.22%. The boys at Bespoke pointed out that this was the 4th deepest selloff without a 20% rally.
"It is worth noting that dating back to 1920, there are only 4 comparable months I could find. September 1931 was down 29.94%, October 1987 was down 21.76%, May 1940 was down 23.95% and March 1938 was down 25.04% which would mean that right now, October 2008 is the single worst month in history."
After Tuesday's pop, the SPX is now down ~19% for the month. October '08 may be spared the ignomy of being one of the worst ever months . . .
Here's an interesting question: What month contained the worst losses? Not as of the 31st, but simply the worst peak-to-trough fall intra-month. Any ideas?
~~~
Update: Mike Panzner sends along these data points:
| Month | Date of High Close | Date of Low Close | Number of Days | High-Low Loss |
| October-29 | 10-Oct-29 | 29-Oct-29 | 19 | -33.69% |
| October-87 | 5-Oct-87 | 19-Oct-87 | 14 | -31.47% |
| September-31 | 1-Sep-31 | 30-Sep-31 | 29 | -30.24% |
| October-08 | 1-Oct-08 | 27-Oct-08 | 26 | -26.88% |
| May-32 | 6-May-32 | 31-May-32 | 25 | -26.60% |
| March-38 | 1-Mar-38 | 31-Mar-38 | 30 | -25.83% |
| May-40 | 3-May-40 | 21-May-40 | 18 | -24.59% |
| November-29 | 4-Nov-29 | 13-Nov-29 | 9 | -22.81% |
| October-37 | 1-Oct-37 | 18-Oct-37 | 17 | -21.57% |
| September-32 | 7-Sep-32 | 19-Sep-32 | 12 | -21.16% |
| July-33 | 18-Jul-33 | 21-Jul-33 | 3 | -20.90% |
| April-30 | 2-Apr-30 | 24-Apr-30 | 22 | -20.53% |
| October-32 | 3-Oct-32 | 10-Oct-32 | 7 | -20.35% |
Wednesday, October 29, 2008 | 10:38 AM | Permalink
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Comments
Let's go for the record! Sell this garbage. Let's make history. Do it for the kids. We can all get hats made just like TV clowns.
disclosure: short
Posted by: jason | Oct 29, 2008 11:08:59 AM
Wow. What else is there to say?
Posted by: Jeff M. | Oct 29, 2008 11:15:54 AM
This is just SO funny how the financial world has the Central banks and the Politicians by the balls! They literally don't have to do business, hang out and sip coffee, and it will force the hand of the governments! Profits are theirs and the burden is shouldered by the taxpayers, governments are the scapgoats! What a power move!
Posted by: rob p | Oct 29, 2008 11:16:31 AM
I'm expecting that it will close as the record month. Only a few more days until we find out.
Posted by: Michael Lomker | Oct 29, 2008 11:18:46 AM
Traditionally the worst month for equities is September. For the S&P it is the only month that has averaged a negative return since inception (1926)
Posted by: Dmitriy Katsnelson | Oct 29, 2008 11:22:15 AM
no matter how many times I re-boot my abacus I can't make a 27% fall in October 2008 be larger than a 29% drop in September 1931.
So October 2008 is the "worst month in history" if you ignore yesterday's rally as well as the month that was actually the worst month.
Other than that, great post.
Posted by: john haskell | Oct 29, 2008 11:32:32 AM
John Haskell; this was a data mining error on my part, which was corrected shortly after. Unfortunately Barry's post went live before the correction was viewed, but you are entirely correct. September 1931 was down 29.44% making it the worst month of all time. At the time of the email, October would've been 2nd.
Posted by: Dan Greenhaus | Oct 29, 2008 11:39:35 AM
@haskell
Hilarious.
Posted by: dgov | Oct 29, 2008 11:57:40 AM
@haskell
Hilarious.
Posted by: dgov | Oct 29, 2008 11:58:03 AM
How can you say this is the worst month ever as there are plenty of months coming up??? - that will be the worst ever???
DOW 6,000
Posted by: fresnodan | Oct 29, 2008 11:59:04 AM
John Haskell; this was a data mining error on my part, which was corrected shortly after. Unfortunately Barry's post went live before the correction was viewed, but you are entirely correct. September 1931 was down 29.44% making it the worst month of all time. At the time of the email, October would've been 2nd.
Posted by: Dan Greenhaus | Wednesday, October 29, 2008 at 11:39 AM
Thanks for clearing that up guys. I feel much better now
Posted by: DavidB | Oct 29, 2008 12:02:51 PM
With data only going back to 1950:
Oct 1987 was down 34.2% high to low.
This month 28% high to low (month ain't over yet).
Barry, what happened to that "It's all contained" post?
Posted by: mark mchugh | Oct 29, 2008 12:06:30 PM
Best month? Or best month *ever*?
Posted by: faux steve barry | Oct 29, 2008 12:14:05 PM
fresnodan<---interesting call, you could be right, it could even go to zero. But the chances are the market will be waving at you from 12,000 as it picks up speed from all the money they are pumping in! Maybe you can try to get on this train about 15k--then you'll be making another market call that we are going to the moon--we will prob. be seling about then--lol
Posted by: gunthestops | Oct 29, 2008 12:18:53 PM
Should one be driving the volatility further up it may produce the worst month ever.
Posted by: Philippe | Oct 29, 2008 12:24:09 PM
There is more bad news under the covers....
As someone else pointed out in the Case-Shiller analysis...in the sales of existing homes, all that is looked at is the original purchase price and the selling price. Most homes have new carpet, new roofs, pool additions, you know the stuff...
These expenses are not factored into the data...makes the decline in housing values worse than they appear on the surface..
Posted by: Bruce in Tennessee | Oct 29, 2008 12:30:27 PM
Anyone looking forward to tomorrow's GDP numbers? JPM had an interesting memo calling for a global recession.
Posted by: bk | Oct 29, 2008 12:35:17 PM
Looks like another run up into the FOMC decision. Wonder if this will be one of those two-way tapes with a sell-off in the afternoon?
Long GDX, took off my hedge. The $ has turned...
Bruce do you want a burger bet on how far this rally will run ???
Posted by: leftback | Oct 29, 2008 12:36:53 PM
The hedge funds have now bet the market entirely the wrong way.
Talk about unloading. This is going to be awesome for anyone who got long ahead of it.
Posted by: John Borchers | Oct 29, 2008 12:37:53 PM
September?
Posted by: PHB | Oct 29, 2008 12:46:47 PM
All signs point to a continuation of yesterdays move.
We now have: Daily, 60 min, and 15 min charts all in confirmed uptrends, and triple bottom pattern confirmation.
I think the best plays for someone who's been in cash and wants to trade this recovery are:
1. Long SPY, DIA, or QQQQ (Ultra's if you want em: SSO, QLD)
2. Short Vol via short VIX November Calls
3. Short FXY
4. Long GLD to hedge being long the indices.
If we get a knee jerk sell off following the Fed announcement then its time to pounce.
See the Pessimistas and the EOW Posse @ 1100 on SPX... Have fun espousing your armageddon prophecies along the way.
Best,
I-Man
Posted by: I-Man | Oct 29, 2008 12:52:21 PM
Barry,
The worst intra-month decline for the S&P 500 is -33.69% in October 1929, followed by August 1932 & October 1987 at -31.5%.
For DJIA, the worst intra-month declines were October 1929 at -34.8% and October 1987 at -34.2%.
-Will
Posted by: Will G | Oct 29, 2008 1:03:04 PM
"If we get a knee jerk sell off following the Fed announcement then its time to pounce."
Posted by: I-Man | Oct 29, 2008 12:52:21 PM
Don't fight the central banks of the world? Momentum over fundamentals? ... I think you're probably right. I don't like to trade Fed days so I have cut my risk down. Long GDX is my only trade remaining today.
I can also see a distinct possibility of a run up into resistance at 1000 (first), 1066 (very soft) and even to 1100 before EOY. Longer term the earnings picture is going to be dismal and I think we will see a lower low, probably early in 2009.
Posted by: leftback | Oct 29, 2008 1:09:23 PM
Take a look at the ISDA protocol timeline, which tracks the auctions for CDS settlements for events related to bank closures. the days the DJIA has fallen off the cliff this month have been the days before the settlements of Lehman and Wamu. Next week there are three auctions for the three iceland banks, so hold on tight next week because we are in for quite a ride... It just might save october though!
Posted by: danny | Oct 29, 2008 5:05:23 PM
The significance here is that, other than the 1987 anomaly, all of these declines fall under the timeline of the last major depression.
Posted by: Phil | Oct 29, 2008 7:47:32 PM
