.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko: Do you think the Dow Jones can crash again like it did in 1987? What similarities do you see today to the economics of 1987? I’m very frightened that the Dow Jones averages will crash. I’m 71 and have $683,000 in stocks, which pays my wife and me $31,000 a year, and this income is very important to our retirement. If the market crashes, we will be economically devastated. I’m so concerned that my wife and I are considering applying for positions at Wal-Mart and McDonald’s. Our young broker tells me that we shouldn’t worry, though he’s never experienced a market crash like 1987 or the tech bubble in 2000. I’m sure you remember October 1987 very well. Please tell us what you think.

Dear B.W.: I was in this business when most of today’s brokers were taking their nourishment from a nippled bottle or still in diapers. And I remember with startling clarity that Friday, Oct. 19, when the Dow Jones plunged like a grand piano from the Brooklyn Bridge, crashing 23 percent, or 508 points, in one day. That 508-point drop is equivalent to more than 3,200 points in today’s market. I remember that day vividly because after the market closed, one of our brokers had a heart attack and had to be rushed to a hospital. And because I’m a history buff, I remember Oct. 19 because on that day in 1781, British Gen. Charles Cornwallis surrendered to Gen. George Washington at Yorktown, Va., which was the last major battle of the American Revolution.

The economics of 1987 are quite similar to the economics of 2007:

– The country was lurching through a commercial real estate bubble in 1987 and prices were falling like dominoes. Today we have a residential real estate bubble and the market values of millions of homes are less than the mortgage amount.

– In 1987 we were in the midst of a notorious savings and loan scandal (remember Charles Keating and Lincoln S&L) forcing many S&Ls to close their doors and putting some S&L officers in jail. Today we are coping with serious mortgage fraud, and the crush of bad loans is playing havoc with the economy. Many mortgage companies have gone bankrupt and some owners are looking at jail time.

– In 1987 the junk bond and leveraged buyout markets were imploding and today private equity companies are having serious difficulty meeting their obligations.

– In 1987 we were at the mercy of newly installed computerized trading programs. Today’s computerized trading programs are more sophisticated and controlling and roiling the markets.

– In 1987 the U.S. budget deficit was frighteningly high. It threatened to collapse the economy and there were dire predictions of a recession. Today the U.S. budget deficit is frighteningly higher and there are predictions of a recession.

– In 1987 the trade deficit was climbing at record rates and the dollar had fallen sharply against other world currencies. Today the trade deficit has exploded to record numbers and the U.S. dollar has fallen to new lows against other world currencies.

– In 1987 we were losing jobs to Japan and Mexico. Today the United States is losing jobs to China and India. I can continue for a few pages, but I think these comparisons are enough.

Today has many similarities to 20 years ago, so some market sages and some sage economists believe that we could have a repeat of 1987, while other sages, just as accomplished, believe that the Dow Jones will continue to rise to the 20,000 level. I’m a charter member of the latter school, but I know the path to the 20,000 mark will have many small and some big potholes, some minor roadblocks and difficult detours. But if you’re in your 20s, 40s or 50s, then you have the healing hands of time in your favor.

However, if you’re in your early 60s or older and depend on a portfolio for retirement income, you must be a light sleeper and you must make certain your investments can survive the harsh volatility in the coming years. So make certain you read my next column for some ideas on how to reposition your portfolio for those golden years of your life.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service