 Good day, fellow investors. On October 19 1987 the stock market crashed 22.6% in one day, the so-called Black Monday. In this video I want to see what happened before that Black Monday 1987, what's the current situation and what's the likelihood of that happening again. So the first thing to look at is the stock market has been in a five-year pull market from 1982 till 1987 before the straight crash, after the crash it traded a bit sideways and then it surged 10 times till today. So from a historical perspective this big drop here is just tiny tiny tiny on the long-term chart and nobody's afraid of another stock market crash because they think oh in the long-term stocks go up. That will not be the case this time but let's compare valuations back then and now. So from 1982 till 1987 the SAP 500 price-to-earnings ratio increased by 10 points. It was 10 in 1982 and then it went to 20. If I take a look at what happened in the last seven, eight years, the price earnings ratio was 15 back in 2010, it went even down to 14 and now is around 25 so again it increased 10 points. One of the reasons for the drop was high valuations which made a lot of investors protect themselves and that was the start of electronic trading and a lot of them set out stop losses. A stop losses is a triggered sale that triggers itself when a stock price drops below a certain level. So when a stock price is at 80 it drops below 70 you automatically sell it. When you do it for yourself that's a good thing because that's rational to protect yourself but when everybody does it becomes a irrational thing and then you have a flash crash like it happened in 1987 or in 2011. So for now we have a bull market for five and seven years, eight years, we have valuations going up so everything looks the same. Let's see what is the Fed doing now and what had the Fed been doing in 1987. So just before the crash the Fed was raising rates slowly by about a year and a half. What is happening now? The Fed has been raising rates slowly for a year and a half. So we have seen three things that are very similar. On top of it everybody now is very very complacent. Everybody thinks stocks can just go up and if something turns, if there is a shock, a crash, I will start selling. However if everybody thinks like that the next bear market or beer market whatever you prefer will be huge because nobody thinks about selling. However when people will panic, when those top losses that are there programmed already will trigger themselves one after the other, in 1987 people call their brokers, they wouldn't reply because they were crowded with selling orders. So many investors weren't able to sell their stocks and the stock market crashed 22%. Today everybody can sell their stocks with a click and when panic arrives we shouldn't exclude another crash like it was the case in 1987. So it's completely possible. Going back to interest rates the federal funds interest rate in 1987 was 7.25% and then the crash came and after a few years the Fed started lowering interest rates to stimulate the economy. The current interest rate is 1.25%, 1.5% if they raise it so the Fed cannot lower interest rates anymore in order to stimulate the economy. Therefore yes the stock market recovered in the 1990s but don't bet on that happening again in the next decade if there is a crash because the main reason behind stocks going up are interest rates. So don't bet on index funds as always bet on good investments, bet on great stocks that will do well in whatever environment and always keep an all-weather portfolio in your mind. Something also very interesting is that October 2007 so 10 years ago was when the SAP 500 reached new highs as it is reaching high. Perhaps October is a bad month for investing. However it's a good month to think about our portfolio. Now okay the risks are there a crash can happen anytime however nobody knows when. So what I always suggest everybody to do is compare what can happen in the stock market what you can gain from the stock market or from an individual stock and what risk can you tolerate because it's all on an individual basis. Currently the SAP 500 can give you 4%. We have discussed many stocks that will give returns above 10% and then you have to see what's the risk what's the reward. I always look for the lower risk and the higher reward. The more you know the more you learn about the stock market the better you are in finding such low risk high returns investment. Following this youtube channel really helps. I really hope there will not be a crash however we have to remain prepared. Thank you for watching I'll see you in the next video.