Reflections on Investing in the 80's

[jazz4cash]

It was around 1983 when I first started investing in the market outside of company 401k which Megacorp had just rolled out. Here are some of the major changes that come to mind on how investing has evolved.....

• No Internet.
• Closing prices were generally only available in the next days newspaper or the nightly news would list a few blue chips.
• You had to call a broker to get a real time quote (with a telephone...land line, of course). Pretty tough to compare quotes.
• Stocks traded in increments of 1/4 or 1/8th.
• Odd Lot Premiums....the share price increased by 1/8th pt if you bought less than 100 shares.
• Discount brokers were not popular. Transaction cost was generally ~1% as I recall.
• It took 5 days to settle a buy or sell order.
• No load mutual funds were not common. Most mutual funds had front end sales load of 3-5%
• No ETFs (as far as I know of)

Lots of things we all take for granted now, but maybe younger investors would be surprised that we have much better access to the market and so many more resources now.

So what other things changes can you add to the list?

 

[aja8888]

You had to go to a broker's office to look at stock quotes. Merrill Lynch had one in downtown Los Angeles that we used to go to a lunch time to check prices.

You got monthly statements in the mail.

 

[MRG]

I've disposed of all certificated shares. Truly a thing of the past for me.

At w*rk in those days(83) I helped to develop and support a stock transfer application. I guess I was to stupid to duck when they asked for a volunteer to support certificate printing; lot of arcane legacy hardware/applications and processes always kept things interesting. Great thing there were no security concerns, send that clear text data across the 9.6Kb leased line.

 

[rbmrtn]

Schwab had a product called "The Equalizer". It was a DOS based dialup connection. You get acount info, quotes, buy/sell. Compuserve also had quotes and investment forums.

 

[pjm-7]

No more coupon bonds. Folks today have no concept of "clipping coupons" to get your interest.

 

[jazz4cash]

No more coupon bonds. Folks today have no concept of "clipping coupons" to get your interest.

Good one! I was trying to explain concept of zero coupon bonds to a family member but of course they didn't know about coupons.



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[ejman]

What I remember most from investing in the 80's was the market crash in 87. I had just started investing in mutual funds at the beginning of the year and I remember standing at an airport in Denver and watching the TV with the news that the market had dropped over 20% in a single day. I thought well, this is it! - serves you right for trusting your money to the stock market! I was so paralysed by fear I did nothing and lo and behold in a few months it was as if it never happened. I learned a lot from that experience, enough so that 15 years after that I was able to ER and yes I continued to be invested in the stock market.

 

[Ian S]

Thanks for the walk down memory lane! I got started around 1980 investing in some 20th Century (now American Century) no-load mutual funds. Also bought some Maryland hospital revenue bonds that had huge yields but not too surprising when 30 year treasury bonds were at 14%. Probably one of the worst investments I made as a novice was at the recommendation of a Merrill Lynch broker: Real Estate Limited Partnerships. Within a year or two after I purchased them, the tax laws changed and wiped out much of their tax advantage. The slump in real estate in the late 80's decimated the property values but they still complicated my tax returns for many years after. Needless to say, I dumped M-L in favor of discount brokers, one of whom, Waterhouse Securities, I've kept until this day via its successor, TD-Ameritrade.

 

[Mulligan]

The daily newspaper really carried the water pale on stock quotes, PE ratios and even dividend yields back then.


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[ownyourfuture]

In August 1985 I had just started the job I retired from @ age 53 on June 6th of this year.

It was a company in the private sector & we had a defined benefit pension plan.
Every time I talked to my Mom, she'd push me to start an IRA.

So in 1986, I opened one at Fidelity.
I contributed $500 in both 1986 and 87, for some reason I skipped 1988.
I added another $250 in 1989 and 1990. By 1991 I was making too much money. My IRA contribution was no longer tax-deductible. So I never added anymore.

Against the advice of everyone, from my first investment in 1986, I put it all in the Fidelity select electronics fund FSELX.
The fund could've been called a chip fund, because it was dominated by chip companies. Intel, Texas Instruments NEXGEN, remember that one, etc

I don't remember the crash of 1987, because I just didn't pay any attention to things like that. I was young, dumb, and well, you know the rest.


By early 2000 the original 1500$ I contributed was worth over $26,000.
A voice inside me told me to sell, I didn't

I know you wanted us to talk about stock investing the 80s, but I have to add this. From about 1993 right up until early 2000, what a time to be invested in chip stocks!

It's almost as if they had a license to print money.
Micron Technology was a company that made memory and also sold home PCs. At one point they were expected to make $19 a share in earnings.

Intel would make upwards of three dollars a share per quarter.
Now they'll be lucky to make that in a year.

Good memories

 

[NW-Bound]

Speaking of Intel, in the late 90s my neighbor plunked down $100K in a call option that expired in perhaps 6 months. I do not recall the strike price relative to the stock price, but he struck gold and made more than $1M (I did not ask for the exact number). He retired early and moved to a more upscale neighborhood.

At about the same time, a memory chip vendor in Cal. made so much money he gave bonuses in the several tens of thousands to all his workers. The sky was raining money. Next came the dot-coms. It was a heck of a time.

 

[ownyourfuture]

Speaking of Intel, in the late 90s my neighbor plunked down $100K in a call option that expired in perhaps 6 months. I do not recall the strike price relative to the stock price, but he struck gold and made more than $1M (I did not ask for the exact number). He retired early and moved to a more upscale neighborhood.

At about the same time, a memory chip vendor in Cal. made so much money he gave bonuses in the several tens of thousands to all his workers. The sky was raining money. Next came the dot-coms. It was a heck of a time.

In January 1997 I bought a Gateway 2000 computer with an Intel Pentium P133 and 16 MB of RAM.

A couple years later I upgraded to 64 MB of RAM. It cost almost $200. No wonder it was raining cash on these companies. wow

 

[MRG]

In the later 80's I spent a fair amount of time with an unnamed mutual fund company HQ in Boston where many fund companies are.

This place was lavish, marble all throughout, expensive art hanging, no problem with getting reimbursed for high end restaurants. Located just a few blocks away from Copley Plaza, very expensive real estate that all the employees w*rked in. Company provided parking for college grads doing data entry. Place was an extreme example of too much money to spend.

One year end the employee's were all excited about a surprise bonus. I heard people talking about buying new cars, boats, kitchens, and homes with this surprise windfall. Seems they had an exceptional amount of inflows of money and new accounts; so much they decided to reward all employees, from the janitorial staff on up. Every employee received a 100% bonus of their salary!

You don't hear much about their funds today, think they had unrelated issues with the SEC.

 

[NW-Bound]

On the tools for investors, I remember that the days before the Internet the way I could get info on MFs was via review articles by Business Week. BW was the only magazine I read. I was too busy working to spend the time reading WSJ or other periodicals to be a more active investor.

I did not dabble in individual stocks until the mid-to-late 90s. Then, Charles Schwab charged $29.95 per online transaction. Prior to the Schwab accounts, I never did have accounts with "full-service" brokerages like Merrill Lynch or Dean Witter, and most of my money was in 401k's and in accounts directly with the MFs. The market was a rising tide that lifted all boats, even leaky ones, and I made good money doing very little.

 

[jazz4cash]

I guess CNBC celebrated their 25th (?) anniversary last year and the Squawk Box program is celebrating 20 yrs (RIP Mark Haynes) now. I remember a predecessor network, the Financial News Network that I believe was based in LA. I know I first had cable about 1982 but the overwhelming financial news program was Wall Street Week with the late Louis Rukeyser broadcast by PBS on Friday evenings. Just like ESPN and The Weather Channel, dedicated topical coverage seems to make the subject more mainstream.