The lessons of Black Monday

The smartest insight and analysis, from all perspectives, rounded up from around the web:

Thirty years ago this week, the U.S. stock market suffered its single most disastrous day, said William Watts at MarketWatch. On Oct. 19, 1987, the Dow Jones industrial average plunged 508 points, or 22.6 percent, spurring “a chaotic, daylong selling frenzy that ricocheted around the world.” In today’s terms, “a percentage fall of that magnitude would knock more than 5,200 points off the Dow.” The Black Monday crash had many causes, but at its heart were overvalued stocks and the market’s growing complexity. Computerized trading was still in its infancy but growing quickly, and financial derivatives had only recently come into widespread use, rendering the market significantly more complex — and vulnerable. “It was the first significant instance of computer-driven trading run amok,” said Richard Dewey at Bloomberg​. One popular financial product, called portfolio insurance, was designed to protect investors by automatically selling index futures when markets fell. But those sales triggered a vicious sell-off cycle that lasted throughout the day. Investors and regulators all “learned the hard way that markets, left to their own devices, can and will break down into panic and chaos.”

Could it happen again? asked Nicole Bullock at the Financial Times. “The comparisons with today’s market are more than just a curiosity.” In October 1987, the stock market had been enjoying a remarkable five-year bull run; we’re now 8 ½ years into a market rally, with the Dow briefly topping a record 23,000 this week. The “biggest red flag” is that U.S. stocks today look even more overvalued than they did back then, with price-to-earnings ratios “at levels topped only by the peaks before the dotcom bubble burst in 2000 and the Great Crash in 1929.” …read more

Source:: The Week – Business

Banking lessons for college students

Here are three of the week’s top pieces of financial advice, gathered from around the web:

College banking lessons
College students: Read the fine print on your school-affiliated bank accounts, said Ann Carrns at The New York Times. Banks consider campuses to be “fertile ground for establishing relationships with prospective customers,” and 10 million students attend a school with a commercial banking agreement. But fees on school-affiliated accounts “vary widely.” Fees paid by students at Florida International University on Wells Fargo accounts averaged $52 in the last school year, for instance, while students at the University of Minnesota averaged $27 for the year on accounts offered by TCF Bank. “It’s wise to do some comparison shopping.” Convenient, no-fee ATMs should be a big consideration, and credit unions and online banks shouldn’t be overlooked.

State taxes for retirees
“It pays to shop around when deciding which state you want to live in during retirement,” said Lorie Konish at CNBC. Retirees often choose to move because of climate or proximity to family, but “how hefty the tax bill will be” should be a key concern. States like Florida, Texas, and Nevada are popular retirement destinations because there is no individual income tax. But retirees should also consider other levies, such as sales tax, property taxes, and state inheritance taxes, when making their decision. Some states tax Social Security or pension income; others offer special deductions to seniors on property taxes, or exempt items like prescription drugs and medical devices from sales taxes. Assessing all state fees, including even car registration costs, will capture the full tax picture.

New payday lender rules
The nation’s top consumer watchdog last week issued new regulations “to prevent lenders from taking advantage of cash-strapped Americans,” said Jim Puzzanghera at the Los Angeles Times. The Consumer …read more

Source:: The Week – Business

Musk gets conditional approval to bore Hyperloop tunnel

By Michael Laris | Washington Post

Maryland’s Department of Transportation has given conditional approval to the construction of a tunnel from Baltimore to Washington, giving a boost – or hype, depending on the viewpoint – to entrepreneur Elon Musk’s plan to build a super-high-speed transportation system.

Related Articles

Borenstein: BART scoffs at driverless train technology

Concord Naval Weapons Station: Traffic, transit, town center

Transbay ferry operator moves headquarters to Berkeley

Richmond ferry terminal to break ground

BART: Redesigned wheels make for quieter ride, but real improvement will take years

The agency said Musk’s the Boring Company can dig miles of tunnel under state roads to be used for the privately financed Hyperloop.

The decision was soon followed by a tweet from Gov. Larry Hogan, R, who videotaped a message backing the budding tunnel builder’s plans to bring “rapid electric transportation to MD – connecting Baltimore City to D.C.”

Transportation experts and engineers were left weighing what one U.S. official termed the “visionary/charlatan ratio” when it comes to Musk and his latest grand plan. Is it the beginning of something brilliant – or brilliant marketing hype?

The project will start near Fort Meade, in Anne Arundel County, said Hogan spokesman Doug Mayer. About 10 miles of tunnel will be under the state-owned portion of Interstate 295, the Baltimore-Washington Parkway, he said.

“It’s called a utility permit. That’s all they need to do the digging,” Mayer said. “It’s a private company, privately financed. The costs to the state will be extremely limited, if anything at all. The state has been working with them for multiple months on the …read more

Source:: The Mercury News – Business

1 2 3 127