Magazine article The Nation

Cruel October

Magazine article The Nation

Cruel October

Article excerpt

Cruel October

On Monday, October 9, the stock market, as measured by the Dow Jones industrial average, closed at an all-time high of 2,791.41. The Wall Street consensus was that things were going swimmingly. Dow 3,000 seemed just around the corner, and there was no recession in sight.

Then, less than a week later, it seemed like October 1987 all over again. In a little more than an hour, the market gave up almost 200 of the 1,000 points it had gained since its post-crash low in December 1987. Once again, October earned its reputation as Wall Street's cruelest month.

Dispensers of reassurance worked the press throughout the weekend to assure the investing public that there was to be no Black Monday II. Although Monday's opening was rocky, the stock market soon rallied, dispelling fears that October 1987 was about to be rerun. Wall Street cynics, never in short supply, suspect that the rally was stage-managed by the Fed, the exchanges and the large brokerage firms.

The proximate cause of the mini-crash was the collapse of a proposed takeover of United Airlines b its executives, the pilot's union and British Airways when the banks financing the deal got cold feet. This was only the latest in a series of mishpas that have been plaguing the debt-financed takeover game for months. Old deals have gone sour as leveraged operators found their interest burden too heavy to service, and new deals have become more difficult to sell as lenders grow more skeptical. so the collapse of the United Airlines proposal was like a spark to dry straw -- speculators feared that this time the jig might really be up.

In itself, that might be good news. The takeover mania has destabilized the productive economy and enriched an unsavory new stratum of leverage artists and their bankers; saying good riddance to the lot would be a pleasure. …

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