Black Monday crash - 30 years on
The 22.6 per cent slide remains the stock exchange's biggest ever. The FT asks what has changed in the intervening years.
Filmed and produced by Gregory Bobillot
30 years have passed since October 19, 1987, when selling pressure rocked the New York Stock Exchange, sending US stocks to the worst one-day decline in history. The cause of the crash that fateful day remains a topic of debate, and markets three decades on operate far differently, with high-speed computers and algorithms replacing many of the fast-talking human traders that once did most of Wall Street's dealings. But there are eerie parallels between today's market and the run-up to what was immortalised as Black Monday.
This week marks the 30th anniversary of the 1987 stock market crash, when Wall Street had its biggest one-day drop in history. We're in lower Manhattan talking to traders about their memories from that day, how the market has changed in the three decades since, and whether another Black Monday could happen again.
I tried to get a quick cup of coffee upstairs in the luncheon club before the opening, and wound up sitting at a table, two tables, away from John Phelan, who was the chairman of the exchange. And every five minutes, somebody would run in and hand him a piece of paper or whisper, and there were no smiles. In fact, people began to look more and more sombre.
Things were done on paper back then, right? So there was no electronic books. We had our pads. We had phones ringing. We did have this little thing called a dot machine, which would spit out orders, retail orders-- buy 100 shares, sell 100 shares, sell 500, sell 1,000. And the machine started getting really busy.
You were just getting-- orders were popping out, and brokers started running around, and it became very real. So I started executing orders en masse. The phones started ringing. People were screaming and yelling.
It was a matter of don't buy 'em now, because they're gonna get cheaper. And stocks were falling in increments of $1, $2, $5, right? People were running around with stacks of orders-- sell 100,000, sell 100,000-- and they would just stop trading for a minute and go, let's put on a big print.
Well, in 1987, what happened is I was working for Salomon. I was running Salomon, co-running Salomon Brothers, which they don't exist anymore, but back then, they were five times bigger than Goldman Sachs is today. And what would happen is the head of my desk, Stanley Shopkorn, would call down and say, Rudy, I got nothing but sellers coming in.
I had a flux of sell orders that just kept coming in. They kept coming in in lots of 5,000, 10,000, 20,000, and every sale you made was a great sale because the next sale was lower. And what happened is the people who were buying it were depleting cash, because the only way to raise capital is to make a sale.
I guess one of the burning questions now is, could this happen again today?
I'm not going to say never. It's very, very unlikely, because we have circuit breakers. We'll shut down for an hour. If it drops another percentage, we'll shut down for two hours. And if after 3 o'clock, it drops a certain, the market just shuts down totally.
You know, any number of reasons this market, if it was ready to sell-off, it's had a lot of opportunity and reason to do it, and it hasn't. We've seen short, small, headline-driven sell-offs of 2, 300 points, right, and we've rebounded.
The market sold off 900 points the night Trump was elected. By the time we opened in New York, we were up 1,000. Brexit, it went down 1,000. By the end of the day, it was back up. So to make a long story short, to make a short story long, I don't think it's going to happen.
Do you see any similarities or parallels in today's markets that would be reminiscent of the period just before the crash in '87?
Well, the parallel is, despite doubts, despite people's reservations, both this year and '87, the rally was relentless. And it has been, eating up golds of 22,000, 23,000, et cetera. Now I don't think we're as leveraged as we were in '87, and that I'm happy with. But I do worry when a market stays one-sided for 3/4 of a year, because I remember that.
The way you survive over 50 years in this business is, the first thing I look for when I enter a room is the exit sign. I want to know how to get out if I have to get out. So when I see these reminiscences, I get a little twinge, and I check where the exit sign is again.
Many say the market is due for a correction. An eight-year rally has taken indexes to ever higher levels. But few expect a near-term bout of extreme market turbulence the likes of Black Monday.
For one, there are controls in place now to halt trading in times of sharp declines. Central bank intervention is also all but expected. Market veterans who were around then and now also say that even though valuations are high, the kind of euphoria that preceded sell-offs like the dot.com crash and the financial crisis are not present, at least not yet. Nicole Bullock, Financial Times, New York.