25th anniversary of Black Monday

[veremchuka]

Friday, 10/19, is the 25th anniversary of Black Monday October 19th, 1987. The DJIA dropped almost 23% on that day which I believe is the worst one day drop ever. No one knew what they were buying or selling at because the "tape" was so backed up and it took several hours to settle accounts. They were not even certain they could reopen the next morning, I need to rewatch that for the details but it was very touch and go at 4 or 6 am on 10/20!

I had just started the job I retired from 10 months earlier. While I was good at saving money even back then I wasn't investing much. Back then my company required you to be employed for a year before you could invest in the 401k, totally stupid but that's how it was. So I had very little in the market, just some from a prior 401k. There were a couple of guys freaking out on the van we commuted on and they were really upset as they were older and had a lot in the markets especially individual stocks. My comment was markets go up, markets go down! I really did say that which is a quote of Ronald Reagan but I don't know if I knew that back then.

So in a few months after I retired it was the 20th anniversary. CNBC ran a 1 hour special about it and I was very interested in learning about it so I taped it. Unfortunately I did not watch it for a while and failed to act! As a new retiree I should have grasped the difference between working and plowing money into equity mutual funds and being retired. Today I realize I should have been more conservative when the bottom started to fall out of things but I was so sold on buy and hold I didn't and I didn't rebalance. I've almost recovered but it's taken 5 years. Fortunately this didn't hurt me other than seeing a good sized nest egg evaporate into a small one.

Any remembrances from that date?

[brewer12345]

I don't want to make you feel old, but I only vaguely remember it from when I was in high school.

[Bikerdude]

http://www.early-retirement.org/foru...t=black+monday

I remember being in the Investment Library of Megacorp crowded around the "Quotron" terminal watching in disbelief as the markets kept falling.

I couldn't wait until Friday to get some soothing words from Lou.

After the Crash - Part 1 - Wall Street Week Oct. 23, 1987 - YouTube

[JoeWras]

I had just started with my 401k. NBR and some of the other financial shows (like Lou's) kept my head level.

I did nothing. I ended up doing nothing in the 2001 and 2008 shocks either.

In retrospect, I wish I had *bought* more on all 3 occasions.

[easysurfer]

That was before my investments days.

I remember just poking away at w*rk when co-w*rkers were at a panic.

[marko]

My boss lost over $2MM that day. He was calm and acting like nothing was wrong. I remember all of us marveling at his composure.

[Chuckanut]

Quote:

Originally Posted by Bikerdude I couldn't wait until Friday to get some soothing words from Lou. After the Crash - Part 1 - Wall Street Week Oct. 23, 1987 - YouTube

Yes, it is the tough times that show the wisdom of guys like Sir John Templeton, Peter Lynch , Michael Price, etc.

[JoeWras]

Man, I need to retire. Watching WSW is bittersweet. I miss that show.

Today we have twitter. Who knows what happens next crash now that we have twitter.

Yep. It's official. Sounding old. Time to ER.

[Alan]

Quote:

Originally Posted by easysurfer That was before my investments days. I remember just poking away at w*rk when co-w*rkers were at a panic.

Same here.

I do remember the day well as every few minutes it seemed like someone would rush into our open-plan office and announce how much further our Megacorp's stock price had dropped.

I had some company stock from the profit sharing scheme (annual bonus paid as shares) but in preparation for our move to the USA on October 10th I had sold my shares a few weeks earlier.

[Midpack]

That's amazing, I would have guessed it was longer back. I went all in on the day after the crash, one of the best decisions I've ever made...

I actually remember Rukeyser's opening monologue that Friday.

Thanks for highlighting the anniversary, I'd never have thought of it.

[ejman]

I started investing in the market in January 1987 when I took my hard earned money from working overseas for quite a few years and invested in a diversified portfolio of stock funds. I went into total panic/shut down mode as a result of the 87 crash. I was so paralyzed by fear that I did nothing. Thank God for that. After a year or two I realized that fear made me do the right thing - nothing. The subsequent crashes of 92, 98, 00, 08 etc I did the same thing (minus the panic) and as a result I was able to ER in 2002 and today's NW is higher by quite a bit.

[NW-Bound]

Back then, I did not have that much in the market to be that concerned, plus I was working too hard to think about much else. I did not do anything.

Quote:

Originally Posted by Midpack ...went all in on the day after the crash, one of the best decisions I've ever made...

Bring on a crash now, so I can deploy my 25% cash.
And I may even go on margin.
If it does not work out, I can go back to work.

No? Not a good idea? People here got no cash? Ooops.

[NYEXPAT]

I will never forget it! I went short the S&P futures and made several million by lunch! Been retired 25 years and loving it.

[samclem]

I had been subscribing to a mutual fund investing newsletter--remember those? It came in the mail every few weeks, had an onionskin piece of paper with overprints so you could place it atop the charts and see moving averages, etc.

Like most folks, my account balance got schwacked on Black Monday. Imagine my surprise when I got the next newsletter and their model portfolios indicated that that they had recommended a "sell" on the Friday before the crash. How convenient. That's when it became clear to me that some of the amazing historical returns of the gurus were the product of retrospective analysis. Another factor in turning me away from timing and active trading, that lesson from Black Monday probably saved me a ton of money.

[audreyh1]

I was working, but I wasn't even aware it had happened! LOL!

[FUEGO]

Quote:

Originally Posted by brewer12345 I don't want to make you feel old, but I only vaguely remember it from when I was in high school.

High school? You make me feel old! I was still wearing superman underwear and enjoying 2nd grade...

Seriously, I don't really remember any of it. My dad watched "NBR" (Nightly Business Report) every night (and still does if it is on??). He was probably yelling and cussing. I do remember he lost his job around that time, so I imagine the financial stress in the house came from the sole breadwinner not having an income instead of significant depreciation of financial wealth. Plus we didn't have much in the market anyway (dad was only 4 years out of college at the time).

To me, the October 1987 crash is just something I look back on in financial history, just like September 11 is merely "history" to my kids (they just learned about it in school).

[Nords]

Spouse and I had been married for just over a year. We were stationed at the Naval Postgraduate School in Monterey, the world's largest adult playground. I had just finished serving my initial five-year obligation (from attending USNA) and was incurring another five-year obligation for attending NPS. However I was a nuke in good standing on 1 Oct, so I'd received a honkin' big nuclear retention bonus check of (drum roll) $7000 (before taxes). I'd deposited the check in my checking account but I hadn't done anything with it yet.

Back then NPS was a school for grownups. (Maybe it still is. I'm not sure.) You were expected to attend class but muster was not taken and the only real sin was falling behind on your thesis. On Black Monday we were vaguely aware that the stock market was going down, but we were new to investing and we didn't really see how that would have any significance to our lives. Heck, back then I didn't even know who Warren Buffett was.

On Tuesday NPS was a ghost campus. Almost nobody showed up for classes or studying or anything. On Wednesday we learned that classmates had been staying home either frantically calling their brokers or researching their portfolio damage.

One classmate in particular, a stock-market junkie, finally showed up on Friday. He'd been researching the WSJ and Value Line all week with growing disbelief at the prices he was seeing. He kept raving & ranting about the emotional over-reaction and the great values and the fantastic bargains. Over the weekend we looked up our mutual funds in the newspaper and discovered that they were "on sale". I think back then we were paying 2% loads to invest in Fidelity Puritan and Equity-Income. We figured that we were going to DCA our money in them anyway, so we made our full IRA contributions and dumped the rest of my bonus money in Equity-Income. By "dumped" I mean that we put the checks into the mail on the following Monday and had a confirmation in our hands about 10 days later.

That paid off pretty handsomely.

[Khufu]

By Friday of the week before it was clear a panic of some kind was coming on Black Monday. I was responsible for the computer systems at a Wall St. money manager running about $5 billion in equities. So, I was in the office very early on Monday morning. Our computers were HP 3000 mini-computers, which were necessary for trading and back-office functions like settlement. Just after I arrived the main system crashed with a hardware problem. I called HP support with whom we had a contract that provided for 4 hour response time, but no commitment on actual time to repair, naturally. I called support and was on hold for a few minutes. When the support operator came on, I described the problem and he said they would get back to me. I then told him that we needed the computer to run our $5 billion portfolio and that we expected the market to crash when it opened at 9:30 AM. Therefore, I was going to hang up the phone and if it did not ring again within one minute my next call was going to be to the president of HP. I hung up the phone and kept my hand on the receiver, which rang in about 30 seconds with an HP technician. He arrived in time to fix the problem before the market opening. HP was a great company then and I was pretty glad we had chosen them.

In fact, we maintained a backup computer with completely up-to-date portfolio information with which we actually could have run for the day. But then we would have been truly without a backup. So I lied, but my job was to protect my company.

At the time I had zero invested in equities on the theory that since my income depended entirely on the stock market as well as the value of my Manhattan apartment, to invest in stocks would be concentrating my risk unacceptably. I considered going all in at the time, but stuck to my policy.

[obgyn65]

No. I was living in a different continent, and did not speak of word of English then...

Quote:

Originally Posted by veremchuka Any remembrances from that date?

[foxfirev5]

My meager account went down about 8k that day. It was my first test of staying the course- before I even knew about staying the course. Fortunately I took no action as I did with the subsequent corrections and crashes. I passively invested new contributions to bring equities back to the target. Nothing fancy but 25 years later no regrets either.