With global stock markets mixed, today a legend in the business sent King World News a powerful piece pointing out that not everyone survived this carnage.
October 19 (King World News) – From Art Cashin’s note: “On this day in 1987, the stock market suffered its worst crash of the 20th Century, even worse than 1929. The Dow lost 22% in a single day. Each year as the anniversary of the great ’87 crash approaches, I get requests from what has become a steadily dwindling number of ’87 veterans to repeat my follow-up poem, “The Insurer”. For survivors of October ’87, the memories are seared into our psyches not unlike veterans of some great battle. For, as in a battle, not all who participated survived (financially). It was an amazing couple of weeks in which the wheels almost did come off the locomotive. Someday, maybe I’ll write a book about it.
Anyway, below we repeat the poem. It was written in the manner of Edgar Allen Poe’s, “The Raven”, though it lacks even a scintilla of his talent and clarity…..somewhat like a stick figure rendering of the Mona Lisa. But…..you do the best you can.
While all of the references will be familiar to veterans of ’87, I have learned some folks who read these “Comments” were in Pampers at that time. So we’ll give a quick one paragraph synopsis of the background to the ’87 crash.
A Brief 1987 Recap – Even if there had been no “October Surprise”, the year 1987 would have been a remarkable one for Wall Street. The Dow started the year below 2000 and ran to 2722 by early Fall. (A gain of nearly 38%.) The rally was breaking all the old rules. A group of guys in Chicago came up with a new rule called Portfolio Insurance (or Dynamic Hedging) which might be synopsized as buy strength/sell weakness (we’ll explain another day). The U.S. dollar was weak and the subject of controversy. There was some conflict and confrontation in Iran (U.S. bombing Iranian oil platforms). The President’s wife and right hand had gone into the hospital for a rumored cancer operation. And there was a new SEC chairman who was misquoted in the midst of the free-fall suggesting that maybe markets should close. The misquote greased the skids.
Okay, that’s enough background. Now –
Once upon a Monday dreary
Traders waited worn and weary
as they gazed upon newstickers warning of the day in store
Foreign markets were imploding sending senses of foreboding
With positions overloading
sellers would be bringing more
To dump upon a bloody floor
October now had past its middle
as investors faced this riddle
With their Quotrons they would fiddle looking for The Bull of yore
Greenback’s value falling quickly trade deficit behaving sickly
And with Iran, relations prickly raised the specter of a war
Ahead a day that promised gore
So on the open there came selling
much faster than the tape was telling
While in Chicago they were yelling “Dynamic hedging” is no more!
Specialists were inundated
as futures prices unrelated
Kept the selling unabated
stocks once eight now sell at four
Futures dipped below the cash now and insurers made a dash now
Trying not to be the last now rushing for the exit door
Then news reporters often shrewder
began misquoting Chairman Ruder
A trading halt?…a new intruder
caused yet more panic on the floor
Bethesda had a guest named Nancy an operation somewhat chancy Helped to make the markets antsy adding to our selling lore
Throughout the day as prices melted brokers, dealers all got pelted
And bank accounts not safety-belted were blown away forever more
The bell, it rang to end the sorrow
while traders ran to banks to borrow
To have an ante for tomorrow
not knowing what it held in store
Twenty eight years have since gone by with circuit breakers now we try
To tame computers gone awry
and restore calm upon the floor
The Dow now stands near eight times higher than when it closed that day so dire
Despite two wars and terror fire
the bulls arose to run some more
This anniversary, headlines new dwell upon that day we rue
They ask us veterans to review
a time that left us scared & sore
Yet chills we get from déjà vu
fear that banks may run askew
While trading partners threaten too as in that sad October yore
But keep your faith it’s a new day * though there are hints that skies may turn gray
We’ll hope such clouds won’t bring a blue day let’s hope the Bull remains some more!!
*Updated Revisions – We revisit the ’87 crash each year because it was truly unique. The Dow fell over 22% in one day. That would be a single day drop of over 3700 points in today’s market. From the year’s high to the low of the 19th, the Dow fell nearly 40% in under two months. None who were there shall forget it.
A Personal Remembrance – On Black Monday, I was running the Floor for PaineWebber. I arrived early in the morning to check out the systems and the staffing. We expected a tumultuous day since the Dow had fallen 10% the week before, including an unprecedented 108 point drop at the close of Friday’s Expiration. (The largest point drop in history at the time.) With all systems checked, we headed up to the dining room of the Luncheon Club for a quick cup of coffee. The place was jammed with other nervous early arrivals. A buzz developed as word spread that several foreign markets were imploding – down 8% to 10%. Some of the other traders would kid me about my penchant to throw in an occasional Latin phrase in stressful or strange situations. (Four years of Jesuit Latin can build odd habits.) One broker approached my table, put his right hand across his chest and said “Moritori te salutamus esse”. It was an approximation of the fabled gladiator’s salute – “We, who are about to die, salute you”. I nodded in response and we all headed for the floor to face the unknown. It is a moment in my life I shall never forget.
Back To The Present – Friday’s equity market managed to build on Thursday’s spectacular gain but the issue was in doubt a couple of times. U.S. stocks opened better thanks in no small part to the nearly universal firmness of equity markets around the globe. Also, helping was a relatively decent set of earnings Friday morning. The opening spike in New York had a relatively short shelf-life. Before the echo of the opening bell had faded, stocks were pulling back, and rather smartly, thanks to a shift and a bit of a head fake in the crude oil pits. By 9:50, the Dow was on the verge of slipping into negative territory only to be saved by yet another shift in the crude price. The stock bulls took over and stabilized prices going into midmorning.
When the European markets managed to close broadly higher at 11:30, the U.S. equity tried another rally attempt. That ran out of steam around noon on yet one more shift in crude. Stocks slipped back to their late morning levels and again began to drift sideways. Around 1:45, crude shifted yet one more time and the Dow headed lower in an almost trapdoor fashion. The Dow was in negative territory and looking like the selling might accelerate. Once again a relatively minor shift in crude led to another change in direction in the Dow. Over the next two hours, stocks would steadily, almost relentlessly move higher to close at the day’s highs and aided by a market on close buy program. Talk about multiple personalities.
Consensus – Markets are overbought and futures indicate a mixed opening. Several Fed speakers today and Williams at 2:00 may move markets since it is an interview rather than a speech. Stick with the drill – stay wary, alert and very, very nimble.” ***KWN has now released the powerful audio interview with Bill Fleckenstein, where he says that gold and silver have entered new bull markets, and discusses the major markets and mining shares, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: The 4th Major Signal In The Past 40 Years Indicates Gold May Have Entered A New Bull Market CLICK HERE.
***KWN has also now released the incredible audio interview with Egon von Greyerz, where he discusses the worldwide collapse, what investors can do to prepare and protect themselves, why gold and silver are headed to new all-time highs and much more, you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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