On Monday, Oct. 19, 1987 the stock market dropped 508 points from 2246 to 1738 in a single day. That’s 22%, the most it had ever dropped (and still the record for a single day drop). It has since dropped more in points on a single day, but from much higher levels.
I was in West Los Angeles heading for work at the Beverly Hills Country Club from a condo the company had rented on Century Park West near the Century City Shopping Center. California’s on Pacific Time, of course, so when I was getting into the car it was already mid-day in New York and the calamity had begun. I spent the next eight hours working and thinking no more about it till I got back to the condo and saw the evening news.
Art Cashin has a much better memory than I and from a much better vantage point: he was running the trading floor for Paine Webber. If you lost any money that day you might be interested in his account.
On Black Monday I was still the Librarian and Records Manager for Coopers & Lybrand in the San Francisco Bay Area. Looking up stock prices was something I did regularly. I remember that day as a hazy blur as we all watched the disaster happen. It was clear nothing WE could do would affect it; accountants weren’t traders (officially at least).
Isn’t it odd how the thing people invent to eliminate risk always seem to end up making the risk worse? I’d forgotten the relationship between portfolio insurance and the Black Monday crash. More recently, we got credit default swaps, which led to the Great Recession. When will they learn that you can’t eliminate risk; you can only disguise it, which runs the risk that you’ll forget it’s there.