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Dark Days on Wall St.

This article in the NY Times, Aug. 1982, was sent to me by my friend Allan, writing "It was written on the eve of the greatest bull market in history, from August, 1982 through March, 2000."

August 15, 1982

Dark Days on Wall Street



The last leg of a bear market is often crushing – a swift plunge in stock prices on heavy volume that pounds small investors and institutions alike, leaving them with big losses and shattered emotions. The effect can be cathartic. But in the vacuum that remains, investors can begin rebuilding their confidence.

That last leg is exactly where the stock market now seems to be heading. Indeed, it is hard to find anyone on Wall Street these days who does not believe, or at least suspect, that the bear market is moving into some sort of climactic phase that will purge the investment community of its pent-up fears of economic collapse.

In the past two weeks, all the market averages have plunged to new lows as Wall Street, beset by cruel economic news from all sides, has time after time been unable to mount a sustained rally. That is a discouraging omen, an indication that the bottom has not been reached, many securities analysts say, and a sign that even the most steel-willed optimists may be about to throw in their towels.

”The market’s going to take the ultimate dive to culmination in the next few weeks,” said James L. Freeman, director of research at the First Boston Corporation, echoing the comments of many other market strategists. ”Batten down the hatches.”

There is certainly good reason for pessimism. The Dow Jones industrial average, battered by the protracted recession, a deepening erosion of corporate profits and anxieties that brokerage firms as well as banks are becoming increasingly vulnerable, slid 45 points in eight straight days through Thursday before regaining 11.13 points Friday to close at 788.05. The average is down almost 25 percent from its peak in April 1981 of 1,030. Broader measures of stock market performance, such as the Standard & Poor’s 500, began declining even earlier – in November 1980. So far, the bear market has cost shareholders $450 billion in losses.

Though the consensus is that the market is in for a tailspin, there is no clear idea on how to play it and confusion seems to be the order of the day. ‘Nobody can tell if the we’re starting a depression or ending one,’ said a mutual fund manager who asked to remain anonymous. "The market is one giant gamble."

Continued here.

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