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I want a one-day stock market crash in October

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Is the market getting you down? You want it to go up, right? Well, you better settle in and brace yourself for even harder times as an individual investor. That is, if some pundits are correct about the direction of share prices. According to this CNBC page, a Dow of 8,000 is now in play, and gold might be set to strap a rocket on its back and propel itself up to $1,500 per ounce over time. I'm not sure about the gold, but a Dow of 8,000 almost feels like a logical rest stop at this point (but that might be emotion talking). In the end, none of us can tell the future.

I can, however, share with you a wish. And it isn't just my wish. I'm sure there are others out there who have already said this. And, yes, this wish is coming from someone who owns The Walt Disney Corporation (NYSE: DIS), The Coca-Cola Company (NYSE: KO), and General Electric (NYSE: GE). I own them for the long term (except for a separate trading position in GE which completely failed and may turn into another long-term asset), so maybe this wish isn't so mysterious. I want to go back to that "happy" time of October of '87. I want to see the Dow drop over 20% in one day. Preferably, I'd like to see it drop 25%, on Cloverfield-monster-sized volume. How many points would that be? As of this writing, it would be roughly 2,670 points.

What, am I insane? About as insane as the idiots who decided to become risk sponges, I suppose. In all seriousness, we need a crash. We need a reset, a reboot. We need a lot of panic on the street, and a spiking VIX ($VIX.X), to at least begin a bottom formation. If you think we're going to form a bottom without pain, you're wrong. And if you think, at this point, that we can form a bottom without a crash, well then, I won't say you're completely wrong on that count, but I will say that a crash would be better.



If we get another Black Monday/Tuesday/Wednesday/whatever in October (and I'm hoping it happens on Halloween, because that would be cool), it'll scare the pants off everyone, mostly retail investors. Weak hands will be taken out, and incredibly inefficiently-priced bargains will be waiting for everyone. It also will accomplish something else -- it will highlight the ludicrous environment which allowed us to get in this mess in the first place, and it will send a clear message to the presidential candidates that they had better start focusing on matters of finance and forget about goofy things such as shaking hands and signing autographs (check out Peter Cohan's recent take on John McCain).

Of course, I'm not kidding myself. No one ever learns from history. Here's the real truth: there are bubble times, and there are depressed times. It's nothing more than a cycle. In this context, I'm sure you'll understand my desire for a one-day sell-off of incredible magnitude. The planet won't stop spinning, we'll come out of it, and for those who bought wisely on the way down (this thought goes especially to the younger people out there), you can rest assured that you'll be happy years from now. I'll define "wisely" as maybe looking at stocks such as Kraft Foods Inc. (NYSE: KFT), PepsiCo (NYSE: PEP), Procter & Gamble (NYSE: PG), and Johnson & Johnson (NYSE: JNJ). And, if you're in a more speculative/risky mood, you may want to look at companies like Goldman Sachs Group, Inc. (NYSE: GS), Apple, Inc. (NASDAQ: AAPL), and Citigroup, Inc. (NYSE: C). When we make it to the other side of the current trade, I think some of these equities will look, in hindsight, as great buys. (Remember: Do your due diligence before buying anything now!)

But, that might not be for a while. We have the current volatility to deal with. We have the fact that the DXD (AMEX: DXD) is probably a better buy these days (particularly on up days) than just about any other instrument out there. I can't say with certainty where the market is heading, but I think there can be no argument against "lower" being the best guess. And if we're going to go lower, I'd rather get there in a hurry with one apocalyptic down day. If you believe the bull is eventually coming back, then you should be wishing, along with me, for a horrifying sequel to Black Monday.

Disclosure: I own Disney, Coke, and GE; positions can change at any time.

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Symbol Lookup
IndexesChangePrice
DJIA-8.3910,218.55
NASDAQ-7.392,146.67
S&P 500-2.901,090.18

Last updated: November 10, 2009: 11:35 AM

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