Remembering Black Monday

[Coach]

Does anyone have interesting memories of Black Monday, October 19, 1987? The DJIA dropped over 20% that day -- about three times the drop we saw on Monday, September 29.

I remember lots of doom and gloom, and lots of comparisons to 1929. I only had a few thousand dollars in retirement accounts at the time, and no stock outside of retirement accounts, with many years of work ahead of me, so it was more interesting than frightening. I did save the next day's newspapers for years, though.

It was all pre-WWW of course, and my retirement savings were at TIAA-CREF in funds that didn't get published in the financial pages, so I didn't have any personal sense of what I had lost on paper that day. By the time I got my next quarterly statement in January the market had recovered enough that it probably didn't look too bad. The DJIA actually ended the year up a little.

Sometimes a lack of information can be a good thing.

Coach

 

[freebird5825]

i wasn't investing then, darn it! but i am currently re-reading some of my investing books to get some historical perspective of today's mess. 1987 was something else...i wonder how i would have weathered it?

 

[Nords]

Does anyone have interesting memories of Black Monday, October 19, 1987? The DJIA dropped over 20% that day -- about three times the drop we saw on Monday, September 29.
I remember lots of doom and gloom, and lots of comparisons to 1929. I only had a few thousand dollars in retirement accounts at the time, and no stock outside of retirement accounts, with many years of work ahead of me, so it was more interesting than frightening.

We were in graduate school at the time. Came home from classes, went out for dinner & socializing, got up the next morning and had a supremely huge "WTF?!?" reaction over the breakfast newspaper.

Most of the students skipped Tuesday classes, and some skipped the rest of the week, doing their research and digging up cash to dump into the market. We cashed out some CDs and emptied our checking accounts into our mutual funds... some gargantuan newlywed amount like $5K. A few greedy submariner shipmates actually signed retention contracts for 3-5 years to get their $10K (minus $2800 tax witholding) annual bonus to dump into the market, too, which was probably worth the payback.

I remember a NYSE employee describing how on Tuesday a number of market makers were bringing in the deeds to their homes to cover the trades that they'd had to complete on Monday in order to maintain an "orderly" market... many reputations, careers, and fortunes were made or lost that day.

 

[tryan]

I ran into a Schwab office and opened an account ... by the end of the week I had bet the farm ($2500) on IBM stock which recovered nicely by year end.

Where there's chaos there is opportunity.

 

[MichaelB]

When I started working (we were living in Venezuela) I was offered a employee stock purchase plan - 15% discount, up to 10% of salary. Thought about it for a minute or so, then signed up. Ten years and 3 kids later, on black monday, the stock lost 1/3 in one day. I noticed - as it was our only savings - though about it for a few minutes, and then got back to work. I didn't intend to sell it so it didn't really mean anything at the time. Continued with the employee stock plan - and noticed that the 10% now bought more shares. In 1992, when we bought our first place - a small apartment in a nice area, sold all the stock, had the cash for about 2/3 of the total price. We managed to scrape up the remaining 1/3 (no mortgages available then) from saved bonuses and such.

At that time my son was a cub scout. The following saturday we went to a pack meeting, and when the boys were meeting the fathers gathered 'round a circle and began to chat. The first said - "My portfolio is fine, I didn't lose a thing". As it went round the circle each father said something similar - either they came out ahead or didn't lose anything.

When it was my turn I could only say - well, either I'm the dumbest guy here or the only honest one, 'cause my stock lost 1/3 of it's value. They all laughed - nobody retracted or changed their story - but ever since, I've always been extra careful to think twice about everything I hear, see or read about investing. My first lesson was the best. Most of the stuff you hear is bull and the only time the price really matters is when you want to sell.

Michael

 

[clifp]

I was home sick that day, so I got to watch the collapse unfold on TV. I put in an order to sell Fidelity Magellan the weekend before so by the time the transaction closed, I managed to sell at the low. Luckily I did put most of the money back in the market in the next week and by the end of the year I was in the black.

Still it was good lesson about selling during a panic.

 

[retire@40]

.

 

[scrinch]

I was not yet in the stock market then...ahhh the innocent days! But I was traveling from eastern Turkey to Ankara that day with a friend who was a few years older and heavily invested (for someone in his early 30's). We got into the hotel in Ankara where he saw in a newspaper in the lobby that the Dow had dropped 500 pts. He dropped his suitcase, and then his lower jaw, and then all the color from his face. I looked at him and the headline, and then asked..."Is that a lot?"

 

[Leonidas]

http://www.early-retirement.org/forums/showpost.php?p=438827&postcount=5

 

[riskadverse]

I was pretty ignorant about the market. I had one stock and it lost about 1/3 of it's value. Since it wasn't much money, I didn't care too much - I'd probably be sick if the same thing happened today even at the same dollar amount.

I had a cousin who traded commodities on the floor in Chicago for his own account. They shut him down while he was 4 million in the hole. He was furious - he was pretty sure he could make it back. The exchange was fearful he and others could bring down the whole exchange. His problems taught me that no matter what the rules are, those in control can change them at any time. You can see that going on right now, which causes me to step back.

 

[cj]

Funny - I was totally ignorant about the market then also, and had no stocks or mutual funds in those days. Seemed too risky, and we had just been through a period when money market funds were paying double digits. My entire savings plan was in "guaranteed income". My coworkers were talking about the drop in the market and freaking out, except one guy who said he was going to buy as much as he could. I sat there all smug because I hadn't lost a thing.

CJ

 

[Bimmerbill]

Not in the market then either. Started 401K contribuiton in 93 I think.

 

[Tiger]

I was in Hong Kong on that day having breakfast with a friend of mine. His boss came to the table and said I lost $1 million today. I replied "I wish I could say that".

 

[bbbamI]

I was new to investing at that time. I figured I would be working until I was at least 60, so it didn't bother me much. I stayed the course and dca'd.

Now that I think of it, I didn't worry much about anything when I was 30 years old.

 

[haha]

I was already retired, with two small kids. The following weekend we were going to a Suzuki violin workshop out in Eastern WA. I had been nervous about the overextended market the summer of '87, but I rearranged things so that I thouoght I had real value, nothing full of air, and figured at worst I would see a little roughness.

Not true. My solid stuff went down as much or even more than everything else. It was quite a blow.

The Suzuki weekend was a comfort and a nice distraction, and I did pick up some hammered stocks with my cash reserve which gave me quick gains to help offset some of the losses.

My main takeaway was something I have mentioned often on the board over the years- when things get stressed, illiquidity increases the positive correlation of almost all asset classes other than cash. Their one similarity trumps all their differences. Their overwhelming similarity is that they are not cash, and that they can be sold to get cash.

ha

 

[dex]

One thing to remember, black Mon. happened in a bull market - it is different this time.

 

[kumquat]

I was in 'get out of debt mode'. No investments (other than DC pension stuff). Planning to work till 65, didn't care a whole bunch.

Today: wondering if I should screw with AA for more equities. Is 6 years cash enough?