Talk:Black Monday (1987)

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Regarding the discussion of technical analysis predictions, for what it is worth, I very well do remember two analysts, independent of each other, in August 1987, publicly and specifically calling a market top and advising a soon-to-be bear market. I also remember very well during that August, September, and October the classic bubble behavior of investors and the media trumpeting the raging Dow, not unlike and very smilar to late 1999 and early 2000.

Also, the term "crash" is (perhaps unfortunately) defined as a percentage drop---but without market context. In the big picture, ignoring percentage drop, Black Monday and the market drop of October 1987 was really only a cyclical bear market in the context of the secular bull market that started in March 1982 and ended in March 2000. Black Monday was really an excellent buying opportunity for mid-term and long-term investors and those investors who understood the principle of long valuation waves. A "crash" of more than 20% following a bubble AT THE END of a secular bull market AT THE END of a long valuation wave is devastating, e.g., March 2000 to March 2003. A "crash" of more than 20% DURING a secular bull market DURING a long valuation wave is when stocks are on sale, which was true of October 1987.

This article looks like it could be a copyvio. Lope, did you copy & paste this from somewhere else on the Internet? Can someone verify this is not a copyvio? —Frecklefoot 18:32, 8 Sep 2003 (UTC)

Also a distinction should be made between Black Monday(Malta) and Black Monday

-nope, those are my own words. If it looks similiar to the 1987 Stock Market Crash website its only because that's a site I've created myself.

The article says: "Many have noted that no major news or events occurred prior to the Monday of the crash, the decline seeming to have come from nowhere." But what about the Great Storm of 1987, three days earlier? Edward 23:38, 2005 May 16 (UTC)

I have never seen a contemporaneous account that said that this storm was on the minds of the traders during the crash. (Nor any post facto accounts either). Chris vLS 21:22, 17 May 2005 (UTC)
Few of the traders could get to work on Friday morning and those that did were unable to trade normally because of problems with the computers, trades had to be made by phone. But then again, this was just London, the crash started elsewhere. Edward 23:31, 2005 May 17 (UTC)

Don't think an isolated storm in Great Britain couldn't have caused a worldwide crash that hit countries as far away as Australia and Japan. Large storms don't have huge effects on stock markets. The typhoon that hit South East Asia last year is an example - world stock markets hardly budged. Commodities did, but not stocks.

The storm may not have caused the world wide crash, however the the reaction of stock brokers to the storm must have had an impact There were other factors which explain why the world economy was fragile at the time, however the crash needed an event to trigger it and there has never been a convincing smoking gun. The typhoon in South East Asia had no impact on major financial institutions so how could it affect the world economy. In fact these days trading can continue seemlessly even if two important buildings in the heart of Ne York are physically destroyed. This was not the case in 1987. The City of London still relied heavily of face to face contact. They did not have lap top computers and they still used the papers they held in the filing cabinets. The storm struck the worst place, from an economic perspective, possible in England - London. It also struck on the worst possible day, Friday, which prevented traders from closing their positions for 3 days. By the time they got to work on Monday it was too late.

The City of London should not be underestimated, it is still very much a major player in the world economy, it is the ancestral home of the "invisible" world economy. It IS the British economy, the City of London is ecomomically bigger by far than the rest of the country; by a long long way. For historical reasons London and New York are particulary close, and there have been many occasions when panic in one market has had a knock on affect on the other market. If the markets in London and New York sneaze then the markets of Australia and Japan will catch a cold, every time.

There most definitely were traders at the time who privately blamed the mess they got into on the storm, as anyone old enough to remember should be able to testify.

-New York and Tokyo were the major markets of the time, don't see how a small storm in the UK could cause a crash. I'd be pretty surprised if many Japanese or New York brokers were even aware of London markets being closed. In general natural disasters don't move stock markets - the floods in the US the summer of 2005 were much more disasterous than the London storm but didn't cause stock markets much grief. Lope

Until the London theory has proof in the form of an academic paper or something else as notable, it contradicts the no original research policy at wikipedia and should probably be removed. Does anyone know where this theory can be referenced? - Aug 3 2006
My father's stock broker used the excuse that the storm of 1987 prevented him from going to work on Friday 16th October, and as a result he had not been able to close his positions ahead of the crash on the following Monday. Of course one stock broker does not cause a crash, but it does suggest because of the storm the London markets may have been vulnerable at the time. I am not suggesting that the panic selling in other markets round the world was a reaction to the London storm per se, but maybe a reaction to the reaction of London Stock brokers. However this is a genuine story that was given to my father within days of the crash, and not something made up years later by a non-academic, or for that matter an academic. Unfortunately I have nothing in writing from the stock broker, but I think it would be a pity to remove this from wikipedia. - Nov 2006.

Contents

[edit] Link at end possibly wrong

The link at the end, which leads to a story about a VAX machine getting into trouble, might be erroneous. I suggest this because I've seen the story before without the line at the very end linking it to Black Monday (in fact, I always thought the event too place significantly prior to 1987). While it's possible that somebody might add this last line to add dramatic emphasis to the story, it's unlikely that it would be cut out by somebody - it's forms a punchline to the story. Therefore I think the link between this VAX story and Black Monday is probably incorrect.

Note: the joke link in question (*Alleged computer mishap) was removed 2005-11-05 RaulMiller 00:20, 22 November 2005 (UTC)


[edit] New Zealand

I'd like to see a graph of the New Zealand sharemarket during this period. It crashed badly, and stayed crashed for years afterwards. The crash caused the collapse of a number of high profile investment companies and affected other parts of the economy, including house prices I think. Tangerine Cossack 14:54, 8 January 2006 (UTC)

I've added a sentence on the crash in New Zealand. See the cited reference for a graph of the main NZ share price index over the following decade. There's more about the effects here: World Markets; A Warning Flag Over New Zealand, New York Times, January 27, 1991. -- Avenue (talk) 13:55, 11 December 2007 (UTC)

[edit] Small error

"In fact it was not the largest one-day percentage decline in recorded stock market history. That occured on December 12, 1914, when the DJIA fell 24.39%."

This is somewhat correct however there was no trading between 7/30/1914 and 12/14/1914 due to WWI. Due to this lapse in time 1987 is considered to largest single day decline.

[edit] Rename/move

I'd like to move this to 1987 Stock market crash (but I am unsure of the ideal capitalisation (not a pun)) which is a bit more meaningful and more likely to be what a user would search for. Any thoughts? -- Ian ≡ talk 03:23, 22 February 2006 (UTC)

1987 stock market crash is already a redirect to this page (you can find it by "what links here"). We could swap them, but there's not much of a practical difference. --Alvestrand 06:46, 22 February 2006 (UTC)

[edit] Causes...

As I recall, some supply siders attributed the crash to the Senate repealing some of Reagan's tax cuts, such a bill passed committe day prior???

[edit] Fallout

I had just entered the brokerage business in October 1987, and one area I would like to see explored is the fallout from the crash. I remember hearing about individuals and firms who suffered staggering losses. Some of the fallout may be esoteric to such areas as restrictions on selling short put options, but there are probably other more significant reactions that can be reported on. Robertknyc 02:21, 1 December 2006 (UTC)

[edit] TA Predictions

"In late August some observers warned that technical analysis indicated the market was now in a cyclical "bear" mode.[verification needed]" I'd like to see verification of this. Technical analysis is hardly universally accepted as accurate. It would be frankly astounding if it predicted a stock market crash like this. --Valwen 06:27, 2 December 2006 (UTC)

I agree with this. I don't remember, at the time, a chorus of analysts, technical or otherwise, saying in late August that the market was in a cyclical bear mode. The S&P and Dow topped on August 25 and had barely begun to pull back into month's end, so it makes no sense that a consensus of technicians would pronounce "in late August" that a cyclical bear market had begun. As of August 31 there was a pullback lasting just a week, and there were no major broken uptrend lines, etc. It probably makes sense to eliminate this line, or, unlikely, provide documentation of the assertion. Robertknyc 16:41, 2 December 2006 (UTC)

Certainly all claims by technical analysts have to be documented with references by reliable media. There is one technical analyst who I more-or-less believe on this point with a possible reference on investopedia, but looking in detail the reference relies only on his own say-so. This is of course Robert Prechter who verifiably claims to have called the run-up (Predicting 3600 on the Dow on the Jan. 5 cover of Barron's). He also had an opinion piece on Oct. 20 1987 with a correction on Oct. 21 in the Wall Street Journal, that seems to say the DOW is going straight down the tubes, this is only the beginning (and I've been saying this for a while). It's the (and I've been saying this for a while) as I remember it, that was the cause of the newspaper correction, and the source of much of Prechter's bad PR. But if he hadn't said this - at least to his own subscribers (and not the public, like his up forecasts) - then it would certainly take large cojones to say it in the WSJ on Oct.20, 1987. So I actually believe him on this, but on not much else.
By the way, as a warning, anything that I say about Prechter may be called into question by Robert Folsom, who works for Prechter and is involved with me in a dispute about the editing of Robert Prechter.
Smallbones 17:31, 2 December 2006 (UTC)

Shouldt the actual decline on october 19 be told in the article?

Something like this:

"The Dow lost 22.6% of its value or $500 billion dollars on October 19 1987".

A bit "strange" that one cant read this number from the current article, only comparisons.

193.217.103.155 17:38, 19 February 2007 (UTC) HH, Norway

There is no worth in citing people who have made a correct prediction(?) of the crash. There is ALWAYS someone predicting prices to go the direction you are thinking of, up als well as down. Afterwards, people talk about the winner: "oh, hwo clever of him", but nobody can tell a hit from pure chance. It is meaningful ONLY if a person makes a SERIES of true predictions; and even that does not warrant a good theoriy - think of old Joe Granville who did have his merits as a TA in his time but later on in the '80ies kept saying "sell", "sell", "sell" while the market boomed, boomed, boomed. 213.102.98.183 (talk) 23:45, 14 April 2008 (UTC)

[edit] Iranian connection?

The linked Motley Fool article states, "In the early morning, two U.S. warships shell an Iranian oil platform in the Persian Gulf. Combined with a myriad of economic factors, this helps to set off an unprecedented 508 point downpour in the Dow Jones Industrial Average." Shouldn't this be mentioned, too? Calbaer 02:26, 5 May 2007 (UTC)

I remember the news that morning very well, and this was the only other news story of any substance, other than the turmoil expected in the stock market. It should be included, but I don't think that anybody thinks that this caused the crash - it's notable only in that it was the only other news at the time. Smallbones 13:45, 5 May 2007 (UTC)
Clearly the author(s) of the Motley Fool article think it was the trigger. It would be interesting to see whether anyone else did. Calbaer 13:49, 5 May 2007 (UTC)


[edit] Possibly Related?

Whilst reading an article posted to Slashdot entitled 'Big Red Button Disasters', which asked readers to post their own example of Big Red Button Disasters, I stumbled upon a link to a Big Red Button Disaster that occurred on the same day and apparently coincided with trillions of dollars being moved between two countries and a computer being reset during the transaction. Could this have been a contributing factor or even possibly a cause of black Monday? A very humorous story, actually... http://www.hactrn.net/sra/vaxen.html

On a separate note, wouldn't a more apt name for Black Monday have been Red Monday, denoting a negative number or loss (as opposed to profit)? Jack Schitt 05:59, 10 May 2007 (UTC)

[edit] Reaganomics

Was the 1987 crash a consequence of the economic policy of Ronald Reagan? I've read from some articles alleging it is. I don't know personally but I wonder why the article doesn't even mention the name of Reaganomics. 71.169.36.89 (talk) 23:43, 9 March 2008 (UTC)

I guess no. What Reagan did was making enormous tax presents to the wealthy, by multiplying the level of debt like no US president before or after him (in fact, when he left the level of debt was 2.8 times the level when he came into presidency). But I do not think that this causes a crash. More probably, it was the policy of the FED: hardliner Paul Volcker hat throttled liquidity rigorously for several years to stop the booming inflation which ran by an annual rate of about 20% when Volcker came into office, which still was in the presidency of Jimmy Carter, so that cannot be attributed to Reagan. —Preceding unsigned comment added by 213.102.97.50 (talk) 00:01, 15 April 2008 (UTC)

[edit] Data in the SPX, please!

The DJIA being the least representative of the big indices, please add the corresponding levels of the SPX, which gives a picture far more accurate than the DJIA! 213.102.96.57 (talk) 00:15, 15 April 2008 (UTC)