20 YEARS AGO: Black Monday October 19, 1987

United States
October 16, 2007 9:16am CST
It's been 20 years! I still remember it. Did I lose money on it? No. I sold my stock holdings about 1 week earlier. The stock market was obviously "toppy" and the federal reserve just increased interest rates, "again". That was enough for me. I got out. Unfortunately, I'm not always so smart in my stock market stratey, but I got this one right. What is being discussed here? Black Monday, October 19, 1987 is the day the DOW JONES INDUSTRIAL AVERAGE lost 22.6% of its value in a single day. The DJIA lost over 500 points. It will not be forgotten for as long as there is a history of stock markets to study. Some say it happened because of computer trading. I say that is only partially correct. True, computers played a big part in this, but I see the larger problem in that prices had been bid up too high in relation to earnings. That was the real problem. Computers only made it worse. The use of computers made stock markets easy to track and follow. It was easy to see the stock market was pricey. Just about everyone had optimized their strategy to get out after the speculative bubble had run its course. All the smart money wanted to wait until the stock market was definitely moving to the down side and the run up was for sure "over". The problem? Almost everyone's program decided this had happened on the same day! OOPS! Okay, enough of my speculation on the subject. Here's some documentation and opinions of others. http://www.financialnews-us.com/?page=ushome&contentid=2348964719 http://www.stock-market-crash.net/1987.htm What do you think? It is October again. October often is a weak month. Do you think it could happen again?
2 people like this
4 responses
@efreddy (250)
• Belgium
16 Oct 07
Did I lose Money? Yes and no. I had sold most of my stocks before because on sept 1987 (DJ about 2600points) when I read DJ 3000 not if,but when I thought we could make a big correction ,I told to my sister 2246 or even 1738 were possible but I have my doubts about that last number (I was wrong because the DJ made on 19 october a correction from 2246 to 1738 ),it was very amazing and hard to believe when you told that afterwards that just these two numbers was the correction on 19 october 1987 and I am not a paragnost. I didn't panic and have bought stocks on these lower prices because I said,now we could go to the 3000 points. (In 1990 the Dow has reached the 3000 points). In fact ,I lose money that day but I won a lot later. Do I think it could happen again,of course it could happen again but I don't think it should happen now,there are lots of differences,in sept 1986 (DJ 1733) after a correction the global thought was the party is over after 4 years bullmarket,a year later when we were up more then 50% the thought was 3000 not if,but when though there was a correction on 1 day (19 october1987),the dow stood still on the level of sept 1986. Noone was talking about a stockmarket crash in 1987 and only afterwards everyone has predicted them.
1 person likes this
• United States
16 Oct 07
So, you are a serious student of the market! Good for you. We must talk more in the future. Thank you very much for your informed contribution to this thread.
1 person likes this
@Debs_place (10551)
• United States
16 Oct 07
It can happen at anytime. And the market has been going upward for a while now and is probably due for a correction. I personally lost a bit.... a friend used to love telling people that he sold everything he had 2 days earlier...he had a whopping one share of stock. The good thing is, if you can hang on, you can make the money back.
1 person likes this
• United States
16 Oct 07
"Probably due for a correction." I completely agree with this. If there is a major decline this October, I will jump in with both feet as soon as I estimate it is over. The overall trend still is up, in my opinion.
1 person likes this
@Inky261 (2524)
• Germany
16 Oct 07
Good god, do you have a memory. No, I do not recall it. I did not own stocks. Sure it can happen again. Stocks are tricky business. I had some long years ago and I lost money. But it was not in October 1987. Happy mylotting!
1 person likes this
• United States
16 Oct 07
When you are pushing 60, 20 years does not seem so long ago. As to the stock market, it has been an important part of my life since 1967 when I was 16 and bought my first stock. It has not made me rich, but most of the time my trades are profitable.
2 people like this
• United States
17 Oct 07
How do stock markets work? I just don't get it?
@efreddy (250)
• Belgium
17 Oct 07
A stock is a part of a company,you can buy (or sell)it on the stock market but of course there must someone sell(or buy) for it. Everyday there were people who wants to buy (and sell) ,someone wants to buy or sell on the price of the day (not very smart in my opinion) but there are others who made their price. When you want to buy a stock that was yesterday at close 15 $ and you set your price at 15 $ but there were a lot more people who wants to buy it on that price then people who wants to sell ,the price should be more then 15 $ and you don't get that stock. When there are more people who wants to sell it on that price you bought this stock (and even on a lower price then 15$). For selling it's the opposite. On october 19 1987 there were a lot more people who wants to sell then there were people who wants to buy and stocks tumbled,but the company they want to sell stays the same and most people doesn't think of that,they think when you see smoke, there is fire and because these price of the stock from the company was falling ,the company is in bad shape and they wants to sell too. When they see stocks rise they think the company are doing well and they wants to buy,but you should always ask the question is the stock rising (tumbling) because the company are doing well (is in bad shape) or is it because the investors are overreact. There was no reason why stocks were rising more then 50%(there was a reason why stocks were rising but not that much) on a year from sept 1986 and stocks were too expensive,the correction of it was very heavy and made stocks at a good level again. They always are talking about october 19 1987 because this heavy correction but in August 1987 the DJ has reached 2722 and there was already a correction before october 19 1987 because the fall of 508 points that day was from 2246 to 1738. I had sold most of my stocks in August and september 1987 and was already started to buy a part again on october (too early when you look afterwards but you only knows this afterwards). Never catch a falling knife because you could hurt by it,but on the stock market it isn't always clear if that knife is still falling or is already on the ground and when you want that knife you should have taken it. I lose some money on october 19 1987 but that loss was recovered very fast ,afterwards I had no reason to complain.
1 person likes this
• United States
17 Oct 07
efreddy, Good answer. I came here to answer spiderlizard's question but I see you have already given as good of an answer as can be given. Thanks.
• Singapore
18 Oct 07
Hi efreddy : That was a very knowledgeable answer about the market. For the benefit of mylotters who might be investors here (I believe there's a lot), what is your model of valuating a company whether it's over-valued or under-valued. Thanks. Yours Truly, Tony Chai a disabled stock options trader http://options4u.blogspot.com