Black Monday - The Crash of '87

Discussion in 'Educational Resources' started by BCE, Aug 17, 2010.

  1. BCE


    We're interested in people's experiences and recollections of Black Monday - The Crash of '87.
    Here's a repost of something I just posted in the Hall of Fame thread to get things started. :) Click on the first upper left dot and then click next or previous to go through the sequence. Wasn't involved in the markets then. Along with a lot of other people a former girlfriend of mine lost several hundred thousand dollars and was wiped out. Fortunately for her, her mother is a multimillionaire, close friend of Henry Paulson's, so she was okay. My Dad was a multithousandaire so good thing I wasn't involved. :)

    WSJ article on Black Monday

    And the Pulizer Prize winning story: Terrible Tuesday
  2. You are about 23 years too late... :D
  3. there are actually survivors, like Bill Rennick who was too busy fighting his Korean comrade instead of losing money like everybody else.
  4. benwm


    Did you get carted out in 87, Joe? No shame in that.

    Please tell us what happened...
  5. BCE


  6. da-net


    It was an interesting time. I was with Stewart James...this was a penny house for those that don't know....all of our sponsored companies were manipulated by our back office (trading desk) so we saw some change that day but not much..the market kept trying to find legs, but couldn't

    clients were trying to get thru to their big brokers but the phone lines were jammed, so they called us for quotes...we obliged

    the best quote from that day I ever heard was "Even the liars lost money!"
  7. benwm


    Interesting post by Tide31 from another thread:-

    Here are his/hers comments:-
    As far as one day events for me, '87 was only crash, every other one has just been a bad day or longer term bear. '87 was more than one day but Black Monday was an amazing day.

    We knew it would be bad, but didn't realize as traders just how bad because we were trying desperately as market makers to stay out of the way and figure out p&l or just where stuff was trading, until on a big Wall Street investment banks trading floor we looked up and saw hundreds of people standing around us. They were all the employees from the rest of the firm that came down to watch death on the highway on the equity trading floor.

    I remember several managers standing at the otc desk screaming out orders to try and sell stocks like AAPL from their personal account that were down 50-75% that day alone. They were beyond caring about the 'franchise' of the firms capital and positions but fighting to save their own lives. Every once in a while a severe screaming match would break out, right in the center of the floor, amongst two managers with differing strategies for the disaster.

    The NYSE was trading and a real mess. $5 spreads were the norm. IBM would be quoted $40 bid $50 offer down like $35 on day. Then a $45 bid would show up and someone would scream "there's a bid, hit it, hit it". Nothing was electronic, every order was phoned down to the floor.

    NASDAQ was insane. Like the 'eye' of a hurricane it was actually eerily, extremely quiet during the actual hours of the crash. We were told not to pick up the phones, we might have to buy something. Your positions were what you were going to come out with when the dust settled one day. The real horror of otc was the ensuing weeks. Bartering over trade breaks from the first few frantic hours of that day was a life changing experience for me. It was mandatory that all staff come in on Saturday following Black Monday to deal with the massive trade breaks that showed up on Thursday. T+3 was comparison with T+5 settlement. Once again nothing was electronic every trade done otc was word of mouth. Saturday we would get a call saying "I know you buying 5000 GENZ at $55, you DK (don't know)". Stock now at $17, that's a $190,000 'trade problem', which was a lot more money in '87 than now. There were so many of these calls we were overwhelmed. No 'proof' of any of these trades, you see your word was your honor back then, up until this day. These problems were the reason they changed NASDAQ. Other than modern day circuit breakers and ECN's NYSE essentially the same.

    Don't ever want to see it happen again. We sat around that day thinking what will the world be like after that day was over. I still remember the faces of the people standing around watching the horror from the fringes of the trading floor.