What could precipitate a 1987-style setback?
The leading candidate is a major geopolitical shock. A U.S. attack on Iran, for instance, could drive oil prices past $100 a barrel, lead to wholesale liquidation of dollar assets by Middle Eastern investors and destabilize the region by drawing powers like Russia into the conflict. That, in turn, could set off a financial crisis by prompting wholesale liquidation of stocks by leveraged hedge funds and other investors, while putting enormous stress on the leveraged balance sheets of major banks and securities firms. Such a catastrophe could be worsened by the trillions of dollars of derivatives that Berkshire Hathaway <http://online.barrons.com/quotes/main.html?type=djn&symbol=brka>CEO Warren Buffett has called "financial weapons of mass destruction."