Skip to comments.The Concerns That Spooked Markets On Black Monday Are Comical Compared To The Horrors Of Today
Posted on 10/24/2012 5:10:44 AM PDT by blam
The Concerns That Spooked Markets On Black Monday Are Comical Compared To The Horrors Of Today
Peter Schiff, Euro Pacific Capital
October 24, 2012, 1:40 AM
25 years ago, on another Monday in late October, the financial world seemed to disintegrate in a heartbeat. Though the 205 point drop in the Dow last Friday (the technical anniversary of the '87 Crash) was somewhat reminiscent of its 108-point drop on Friday, October 16, 1987, the real action in '87 was on the Monday that followed. And while this Monday is not nearly as black, it is important that we use the opportunity to recall the circumstances that nearly sent the stock market into cardiac arrest.
While there were technical reasons that allowed the snowball to gather so much mass, it was major economic problems that started it rolling. Those issues remain to this day, but have grown much, much larger. But while they terrified the market 25 years ago, they don't rate a second look today. Whether investors have gotten wise, or merely oblivious, is the question we should be asking.
Though most simply remember the 1987 Crash as one panicked selling day, Black Monday was just the largest drop in a string of bad days. On the Wednesday before, the Dow sold off 95 points (then a record) and dropped another 58 points on the Thursday. On Friday the selling got worse, with the Dow setting another record with a 108 point drop. After thinking about it over the weekend, investors decided to preserve what remained of their gains by selling on Monday. Unfortunately, everyone got the same idea at the same time.
It is true that the Crash was in some ways a technical phenomenon. As of August of 1987, stocks had surged 75% from January 1986,
(Excerpt) Read more at businessinsider.com ...
Black Monday was caused by automated trading systems that cascaded sell-orders.