Rational Advisor

What we are hearing is a lot of news about bank failures, Lehman Bros, Marrill Lynch etc.

Let’s take a look at some US History on Bank Failures and what happened to the markets.

Go back to the the mid 1970’s when Tricky Dicky, Richard Nixon was resigning as presiident of the USA, and we had Vietnam, Watergate. In the mioddle of all of this a Bank called Franklin National Bank failed. Soon after the failure the markets rose.

In the early 1980’s, gold shot up to $800 and a recession ensued. then a bank called Penn Square bank failed, followed by Continental Illinois Bank, subsequent to that we got one of the strongest rallies in the markets - the media was saying “The Death of Equities” - Business Week, the US is broke! But surprisingly things worked out.

In 1988, we got the failure of the First Republic Bank. The government stepped in created Resolution Trust and once again the markets rallied.

In 1991, there was the Savings and Loans crisis, and bank problems were worse, much worse than now, and we saw the failure of the Bank of New England. The resultion of this led to a significant rally.

So, similar to today, the act of Bank Failures (which surprisingly mostly happened in July’s) and the act of resolving these were indications of the bottoms of those markets.

We are possibly there

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