1987 Crash Revisited

Rob Fraim is a reader of mine who puts out his own
amusing comments each day via email. On the 17th anniversary of
the 1987 stock market crash, he put out his recollections from that
day, and we are republishing them today, the 20th anniversary of Black Monday.

I found them so interesting that I suggested Rob (who is
blogless) post them here. He gladly agreed. Without further adieu, here
is Rob’s version of 1987 Crash Revisited

October 19 – the day that each year gives old-timers in this business a renewed facial tic and post-trauma flashbacks.

What?” you say.  “You mean you were actually there, Grandpa?  You remember the Crash of ’87?

Yes, I was, and yes I do.  Confirming rumors that I am, in fact,
older than dirt I note that I was in this business in 1987 – and had
been for a few years prior (I started in 1983.)

I was having dinner last week with a friend who runs a hedge fund
(another graybeard, although he looks younger than me) and we ended up
talking about 1987.  He had a great story about the whole thing (which
I’ll let him tell you about someday if you ever get to have dinner with

So I thought I would take a moment to reflect on my own Crash
Experience – and perhaps some of you will share your October 19, 1987
story (provided you’re not a whippersnapper who would be relating what
was on freakin’ Sesame Street that day!  I really hate you guys.
You’re svelte and unwrinkled and smart and energetic and I’m just
liable to whup you if you’re not careful.)    Maybe we’ll even get a
recounting of the aforementioned dinner tale from last week.  So if you
feel like it, drop me a note with your recollections.  If I get enough
to make it worthwhile, perhaps I’ll compile them for sharing.)

What I Did During the War (or What Felt Like One Anway)”   or…

Dr. Strange-Broker or How I Learned to Stop Worrying and Love the Bear”  by Rob Fraim

I was 29 years old, 4 years in the business, with two young
children.  I thought I had investing figured out, didn’t really, and
was working for the old Dean Witter (now Morgan Stanley.)    The market
had been mostly good during my relatively brief time in the business
and I had survived the crucial new-guy starvation years and had built
up a fairly good book.

So good in fact that I listened to my manager – an advocate it turns out of the “if-you-get-the-brokers-to-really-get-themselves-in-hock-they’ll-be-
” school of thought. (He was also the genius who kept telling us to forget about analyzing stocks ourselves.  “Look,
we pay those analysts in New York a lot of money to do that.  Do you
think you know more than those guys? Your job is to sell
.” He is no
longer in the business, by the way.  Last I heard he had left his wife
and family and was involved in a relationship with a New Age guru type
who had helped him to discover his true “orientation.”  He’s raising
llamas with this guy and chanting or something.   But I digress.”

“You need a new house” he said. “That “piece of#%@ little house of yours isn’t enough.  You need to aim higher. Think bigger.” Actually a new house seemed like a pretty good idea, and the kids were getting bigger, and business was good, and hey…what’s a little extra mortgage to a hot-shot like me?

I pasted a picture of a big house on the door of my little office (thanks to the suggestion of my motivational coach in the big office) and embarked on the quest to get me some o’ that.

Before too long I was closing on a house that was twice the size of the old one and came complete with a mortgage that was only 3 times as large. Coolio!   

We closed on the house on October 1, 1987.   

Oh sure, the market had been a little funky. After peaking in the summer, the market had gone through a pretty good decline – from about 2700 to 2300 or so. In percentage terms, not an insignificant sell-off.  But of course it was just:  summertime doldrums, a little readjustment, things a little ahead of themselves, no problem, secular bull market, great buying opportunity, hey just look —  now we’re getting a second chance at bargain prices. 

And don’t forget:  “We’re paying those guys in New York a lot of money.”

On Friday October 16, three of us brokers decided to play hooky and “have meetings scheduled” that afternoon.  It was one gorgeous fall day.  (By the way, for those of you in other locales – particularly you concrete jungle folks – I heartily recommend my neck of the woods in mid-October.  The lower Shenandoah Valley of Virginia – smack in the middle of the Blue Ridge Mountains – is a great place to be when the air turns crisp and the trees put on their autumn show.  Drop in sometime.  I’ll buy you a beer.)

Making the turn after the 9th hole we stopped in the clubhouse to use the pay phone and call the office (pre-cell phone days you youngsters) and my buddy came back looking a little stunned.  “Down 90,” he said.   Of course these days 90 points doesn’t mean that much.  But down 90 from 2300 was a drop.  “It’s over” he went on.  “The party’s over.”

The weekend was a little tense, since we knew that Monday would open weak.  An understatement as it turned out.  The combination of a Treasury Secretary with a big mouth and what was called “portfolio insurance” (which somehow involved the commandeering of the free market system by that crazed computer from “2001 – A Space Odyssey” ) came together in an incredibly imperfect storm.

At some point during the day a strange, battlefield-giddiness sort of took over and we just…all….laughed.  It was so surreal that all you could do was just laugh.  Mortar shell…giggle…another bomb…chuckle.  As the day went on, clients were trying to make moves – a lot of panic selling of course, along with more buying interest than you might imagine.  There was one small problem though – the systems just crashed.  Market orders, limit orders, stop orders – all in, but no reports.   

Are we filled?

“Don’t know.”   
Should we re-enter the order?” 
“Don’t know – it could have failed and you need to re-enter, or you could be duping a trade.” 
When will we get reports?” 
“Any minute now.” 

  As it turned out it was days later in some cases – and a nonsensical mix of nothing dones, good trades, and fills that were two points or five points away from where you figured they should be.  As the day went on and we approached down 500 we were really trying to do some buying.  But there was no way to know what, when, if, and at what price trades were filling.

In a strange little wrinkle, I figured out something about the Dean Witter system that day.  Back then there was an odd-lot order execution system at Dean Witter.  If you put in an order for less than 100 shares close to the limit where it was trading, the system would automatically fill it (internally, not actually on the exchange) and then almost simultaneously fill it on the exchange so that the system was flat on the position.  By chance, one of the orders that I put in during the period where executions weren’t being reported was for 70 shares of something or another.  Boom.  Instant fill. So the next order for 400 shares or whatever it was – went in as 99-99-99-and-3.  Boom, boom, boom, boom.   I became king of the odd lots for about a day until they wised up and shut the auto-fill system down.

On Monday night, the manager made an evening shift mandatory.

“Call your clients. Tell them what’s going on and what to do.”
Uhhh….what is going on and what should they do?” 

  …..I don’t know.  Tell ‘em to buy or sell something.” 

  His other fabulous idea was to call lots of people that weren’t clients of the firm and act like we had told everybody to get out before the crash and then talk them into transferring their accounts. Oh he was prince of a guy all right. I hope he and Serge and the llamas are happy.

That was October 19, 1987. I went home late and stared at all of my new walls. I had a lot more of them than just a few weeks earlier. And the first (tripled) mortgage payment was due on November the 1st.

In the days after the October 19 crash things did stabilize a bit – even rallying some. Corporations stepped in with real buybacks (not the maybe-someday ones we see so often now.)  The Fed flooded the system with liquidity and somebody unplugged the hell-spawned computers.  The trading systems got back to working and we commenced to explaining why market orders (and limits, and stops) never filled – and more importantly we had the opportunity in the cooler non-panic moments to actually make recommendations and help people figure out how to proceed.   “And of course you bought everything in sight since it was the buying opportunity of a lifetime, right Grandpa Rob?”  Well, yeah, we did some good buying to be sure.  But hand-over-fist-with-reckless-abandon-because-we-knew-for-sure?  Well, I wish we had been that smart.  But by the time the systems came back in full function we had rallied a couple of hundred and it was awfully hard to find anyone who wasn’t warning of the Impending Great Other Shoe.  So yes, we bought, and bought strong, but not as much as hindsight would dictate.

And what most people forget is that the market made its low, not on October 19, but a couple of months later in December.  It’s always simple looking backwards, but tougher at the time (as it was in the 1989 United Airlines-related mini-crash, the Persian Gulf war, the 1994 baby bear, the Long-Term Capital mess, the Russian crisis, post-9/11, etc.   Or today for that matter.

At the risk of being called a Pollyanna or a head-in-the-sand type, here’s an interesting little exercise.  (And you folks know me, and you know my reasonably cautious market stance at present.  I have a long bias and am fairly constructive on the market, but my present “play some defense” mode is well documented.  And I’m old and feeble and decrepit, so I’m not a reckless sort anymore.)

But take a look at this chart.   Pick out 1987  — The Great Crash of our generation.  And then 1989 (or 1994 or…)

click for larger chart

Oh…you needed some dates (and a microscope) to help you find them?

click for larger chart

Kind of interesting to look at things from a longer-term perspective sometimes huh?

Anyway kids, that was a day in the life of Young Rob, semi-new broker in 1987.

How about you?  Care to share your Crash Day story? (Use the comments below to post . . .)

I’ve gotta run now.  Business is pretty good.  And I have a meeting with my real estate agent about this house I’ve got my eye on.

The smart guys in New York say it’s all good.  And never forgetwe pay them a lot of money.

by Rob Fraim

Rob Fraim is a broker and consultant with Mid-Atlantic Securities, Inc. —  serving the investment needs of institutions and high-net worth individual clients nationwide. A 21-year veteran in the investment industry, he lives and works in Roanoke, VA.

To receive his daily commentary, send an email with the word "subscribe" in the subject line to Rob Fraim.


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  1. JustAGuy commented on Oct 15

    Sorry, I replied to the first comment since it was so amazingly wrong-headed, but now I see it was deleted, and no doubt for being off-topic. I should not have bothered responding, so please delete this comment as well as my previous one. Sorry.

  2. Jay Weinstein commented on Oct 15

    I guess I am the only reader of this blog who was in the business on that day….I remember my boss’ face being whiter than any sheet of paper you will ever see.

    But what I really remember is that night, Monday Night Football was the Redskins’ replacement team against the Cowboys who had many players playing who crossed the picket line. The Skins shocked the Cowboys that night, which led me to believe that all was well with the universe after all.

  3. JustAGuy commented on Oct 15

    I was looking for a new job then because we knew that our office was transferring out of state and with it most of our jobs. With that advance warning I was out looking for a new job. That day.

    I was sitting in the reception area waiting for the manager who was scheduled to interview me. As I sat there I began to notice a lot of flurrying going on in this office. Not being familiar with the office I wasn’t sure at first if this was normal behavior. Gradually I realized it was not normal at all. I saw panic on faces. I finally asked the receptionist what was going on and she told me the market was down a lot.

    The manager finally came out and apologized but said we’d have to reschedule. I left and never heard from them again. Probably that job position got frozen.

    (Curiously enough, I had a job interview on 9/11 that was, naturally, canceled. Moral of the story: If you see me sitting at reception waiting to be interviewed, be afraid).

  4. Das Gherkin commented on Oct 15

    So I was reading Jeff Saut’s Investment Strategy over at Minyanville, which is the same as it appears on his site:


    And what I found really funny is that it starts out the same, word for word, from a column he wrote almost exactly a year ago:

    Didn’t Dear Abby get in trouble for that? Funny anyway.

  5. Suge Knight commented on Oct 15

    JustAGuy, and how the hell are we supposed to know what you look like? Bad Joke.

  6. abkline commented on Oct 15

    I had no idea I had become so old that I’m one of the few who can post original recollections of 1987. I had spent three years as a retail broker at Bache and had moved over to, then, Shearson American Express as an Asst. Analyst following small computer stocks, and from there to producing the weekly round-up for the equity research group. I wasn’t at work that Monday. I was coming back from out of town and in the cab on the way from the airport, the driver had the radio on and I heard the market was down 400. My cabbie reassured me that his broker had told him that this wasn’t a crash. I said that his broker was wrong and had him drive me to my dad’s office. He ran Cowen’s mid-town office. In that office was a very old broker by the name of Jacques Coe. He was, I believe, at that time the actual oldest broker on Wall Street. He had been written up. He was so old that he had lived through the 29 crash.

    So, on that bleak Monday, I sat around drinking with my father and a guy who reassured us all that he’d been there, done that and lived to tell the tale. It felt almost possible that we would all get through this, too. But it didn’t seem at all guaranteed.

    What I remember most of all was when people’s accounts went negative. We had never seen it before. Margin calls came in so fast there was no way to meet them and people suddenly had accounts that weren’t worth enough to meet the margin call. They had lost everything. I remember the guys in the office shaking their heads and saying that people were going to end up losing their houses. That was the worst thing they could think of.

    Eventually, we, too, were just giddy. Nothing else you could do. It was a helpless feeling. I was glad I was out of the retail business because I didn’t have to make any phone calls the next day. I could just congratulate Elaine Garzarelli, who was a sector’s analyst in my Shearson office. She had called the crash and was famous for a couple of years as a result.

  7. Joe commented on Oct 15

    I was around 28 years old at the time and not involved in the market yet. A rich guy said to me- “do you know what happened today? “Oh my god the stock market crashed”
    I didnt really understand how that would effect me (Joe Sixpack theory) and replied “good luck with that”
    Bah haha :)

  8. J. Bridges commented on Oct 15

    Thanks for sharing, gentlemen. It’s nice to gain some perspective from those who’ve lived through bear markets, let alone indexes that actually corrected more than once every five years.

    When the Chinese markets eventually disintegrate, I’m sure there will be some fascinating, if sad, stories to emerge from that pile of rubble, too.

  9. Suge Knight commented on Oct 15

    Well, we will not have a crash with Ben “Ben Dover” Bernarke. You can bet your azz.

  10. PeterR commented on Oct 15

    My father died a few weeks before the October 1987 crash.

    I was on vacation in California for my 20th law school reunion. I was 39 at the time.

    I started investing in the markets in the early 1980’s, and had a general awareness of the trends of the times. Coincidentally (???) I had recently subscribed to Frank Curzio’s newsletter (FXC Ivestors), which had a “Crash?” headline a day or two before the actual crash.

    I wanted to be able to sell my Dad’s holdings right then and there, but the official probate court authority to do so did not come through before that event.

    Of course, we now have 20-20 hindsight, but at the time things looked bleak, as they do now, but for different reasons.

    Best of Luck to all.

  11. RW commented on Oct 15

    1987 convinced me I not only needed to pay more attention to risk/reward analysis I needed to factor in the possibility the system could break: My position sizing and exit strategy assumptions have never really been the same.

  12. DILBERT DOGBERT commented on Oct 15

    Not a market person – NASA engineer with no skin in the game at that time. A friend entered my office and said “the market is down 500”. Yikes! My first thought was: We have crossed the Rubicon and what happens now. I was thinking that I might relive my parents experience of the 30’s. Thank god that didn’t happen.

  13. Markham Lee commented on Oct 16

    I feel making people feel old today……

    I was eleven on Black Monday…at the time my rather strict parents didn’t allow us to watch “Mainstream TV” (excepting on Saturdays) – we were a PBS/NPR household.

    I finished watching “The Electric Company” and was settling in for my evening routine, which involved hanging out with my Step-father in his study, watching the McNeil-Lehrer Newshour and then the nightly business report.

    They were all abuzz about the crash.

    I had read about the crash of 1929, so I thought it was a repeat of that same situation and was worried about the family having to stand in bread lines….a concern my step-father quickly disabused.

    “No Markham it’s not that bad, this is a short-term thing”


    Still, he did explain the stock market to me that day, I showed a lot of interest so he got me a subscription to the WSJ.

    Hmm, this story should have a point……..

  14. mote commented on Oct 16

    I remember when Lou Dobbs interviewed Elaine M. Garzarelli – to me, it was the most vivid “get out of Dodge” investment sequences ever.

    I started investing in 1978. What the crash of 1987 taught me was that there are times when mere survival becomes an accomplishment. I’ve had two of them, and they will haunt you for the remainder of your investment life.

    You will mutter “with the grace of God go I” and it won’t have any religious connotation at all, it will simply convey your astonishment.

  15. steeliekid commented on Oct 16

    I was a sophmore in a northeastern college. The large screen TV in the basement of the fraternity house was on 24/7. I popped in inbetween classes and it was tuned to CNN. I didn’t at the time grasp the enormity of the day, but I did know that most of my college funding was in mutual funds.

  16. kevin commented on Oct 16

    In 1987, I was still in college. My father, however, was changing fields and had just started a new job in a downtown broker’s office. On Black Monday, amidst the chaos in that broker’s office, a “little old lady” walked in with most of her savings and said that she’d “heard that P&G was a good company to buy stock in.” My dad’s new boss looked at her and said, “yes, ma’am” and promptly took her money and invested it in a rapidly declining market, with no mention to her of the market conditions. All so he could pocket another commission.

    It would have cost him very little to tell her of the crash, and the way I heard it, she lost thousands that day.

  17. karl smith commented on Oct 16

    I was 9 and I was sitting with my father watching it when I got home from school.

    I remember saying, “but Dad they won’t let the market crash. They won’t let another Great Depression happen.”

    He turned to me and in one of the few times I ever saw my father scared in his life (not even the day he died), he said “It did crash and its worse than the Great Depression”

    Honestly, that was probably the moment the conspiracy theory instinct inside me died and I realized that no entity was even capable of pulling the strings on the whole economy.

  18. weinerdog43 commented on Oct 16

    I was in Austin, TX working for AIG in the Claims dept. I was only 29 and was mostly concerned about my 401k. Our computer screens were about 8″ x 8″ that displayed only green text. Basically, there was a lot of standing around gossiping by us 20 somethings. Some of the older guys (they were always guys in those days) looked sick to their stomachs and spent most of the day on the phone w/their wives or brokers. Finally, some geezer of about 45 yells out, Goddammit!…I’m broke! I’m gunna go get wasted! We all thought this was a terrific excuse to get drunk on a Monday, so off we went too.

  19. ardano commented on Oct 16

    Like the author of the original post, I was a babe in the biz in 1987…I was registered in 85 and worked for Legg Mason in their main DC office. I too had been advised by my branch manager to “leverage life” (as I liked to call it.) This must be page one in the branch manager’s playbook. Like Rob, I too had been told to trust the buy list. Unlike Rob, though I was in a big enough office that a few of the senior brokers had been selling, pre crash.

    Before I became a broker, I had been in the media business and had a good contact at the Washington Post. A week before the crash, I had been called and asked about the market. I responded the way senior brokers in my office had advised me. To paraphase…”I don’t know what’s going to happen, but it might make some sense to take some profits and raise some cash.”

    I didn’t issue a “sell call.” I only advised caution and prudence. My manager took one look at the Wash. Post and told me never to speak to the press without clearing it with him. (I have the article framed in my office as a constant reminder.)

    What I recall most about the days after the crash was just how bad things were. Much worse back then anything that’s occured since. There were rumors about major firms being bankrupt. There were squawk box driven attempts to mobilize brokers to coordinate buys. As a retail broker we had to quickly respond to margin calls. I had a number of substantial clients who took money from my accounts for margin calls at other brokerage houses.

    Shortly after the crash, every broker in my branch was called into the manager’s office for a meeting. We were all asked what we were going to do to help him get through what everyone thought would be an impossible year. Younger brokers like myself were advised to consider career alternatives. I was specifically asked what I was going to do to help lower overhead in the branch.

    I recall my response. I said…”If I had to make 100 phone calls to generate interest in stocks, how many phone calls is it going to take now? My costs are going up, not down.”

    I delieved this assessment to a grim faced industry veteran who is still managing today. My conclusion was to escape to another firm with deeper pockets, but how was I going to get there with a blown book?

    For those of us in the business at that time, do you remember how we survived?

    Closed end bond funds. We had a new closed end bond fund every month. That was how we survived. (At least that’s how I survived.)

    Wall Street gave us one fund after another. Each month a little different. We always pounded people on the deals. We built positions in exchange traded bond funds like they were GM or GE.

    There wasn’t much product in those days. No serious broker made a career on mutual funds. We were mostly stock jockeys. We needed the ability to build positions in those bond funds, margin them, and later trade them a little. We counted on the extra commissions associated with new issues. We also prayed that the firms would not let the bond fund shares drop due to commissions we had been paid on the offering.

    Our smarter clients wondered whether it made more sense to buy these bond funds in the aftermarket. It was desperation that pounded these people into the deals.

    Aftermarket? We’d only make regular commission on an aftermarket trade; not the juice of a new issue.

    That’s my lasting impression of the crash. Closed end bonds funds kept most of us in the game.

    And yes, we did have quote machines back then, not tickers.

    best to all

  20. Chris/tx commented on Oct 16

    I had worked as an expat in Dubai during ’86, saved all my money, quit in early ’87, and decided to try being a full time day trader for a year. Went out and bought one of those spanking new 286 PC’s with a modem (for online quotes), dumped what money was left into the relatively new company called Fidelity with a trading account ($20k or so).

    After a bad January, I was making about a thousand a month trading options. IIRC I had a run of making money or breaking even on about twenty or more trades.

    Then came mid October. Something didn’t feel right, and told my girlfriend that I was living with (now wife) that I was going to sit on the sideline for a couple weeks. Sure enough, less than a week later came Black Monday.

    She came home from working the night shift at the hospital on the morning of Black Monday, and I was in front of the TV basically crying that I had not followed my instincts and bought puts. She said since you were right before, why not follow your instincts now? So I called the brokers I knew in New York for Fidelity about an hour before closing, and told them to buy every thing up to the balance in my account. It took a couple days to even figure out what I owned.

    Eventually I was told they only got half of what I wanted. The bounce I expected happened, but it was mostly built into the options I had bought. Unfortunately I broke my golden rule of not holding over weekends.

    Mainly, I remember watching the financial network late Sunday night (a week after Black Monday), and all the int’l markets opening way down. Didn’t even bother to get up Monday morning other than to see Black Monday II, and know I was basically wiped out.

    Dusted off the resume, and went back to working for the man.

  21. Charles commented on Oct 16

    I wasn’t in the business then, but I had a middle size account. I just got scared in the Summer and got into cash. The market was up three straight years, and 40% that year so far. So I was playing golf with a friend, and when we got into the car to leave, we heard it on the radio. My friend had a margin account and was substantially wiped out. I signed up for a three year subscription to Elaines’ letter, and lost a ton.

    I did get a subscription refund though.

  22. Lindsay commented on Oct 17

    There is a poll on the TradersBlog that asks, “Black Monday – Can It Happen Again This Week?” I am amazed at how divided traders were. When I checked the results there was almost a 50/50 split on how traders thought the market will fair this 20th Anniversary week. Crazy. http://club.ino.com/trading/?poll

Read this next.

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