Most people remember where they were and what you were doing the day the stock market crashed on Oct. 19, 1987. On the 20th anniversary of the crash, we asked our readers to share their memories of the crash and how it affected their personal balance sheets. If time heals all wounds, it also appears to erase big losses.
I was in prison for a drug offense. Prior to being arrested and sentenced, I had been managing my grandparents and parents retirement savings by investing them in mutual funds. While incarcerated, I would read business and financial magazines. I remember about the end of September, I wrote my father a letter telling him I thought it would be best to take all the investments in stock funds for he and my mother and my grandparents and put them in money market funds because I felt the stock market couldn’t go much higher. And since I wasn’t there to move things around if the market started going down, I thought it best that while I was locked up that the money should be in money market funds. Since he had no idea how to do things I remember writing him the instructions on how to call the mutual fund company and how to do the transfers and which funds to transfer into.
I got a letter from him the next week telling me he thought I was crazy since the market had done so well, but since he did not know anything about it he would do what I told him. I think I got his letter on or around October 8. I can remember thinking I was running scared and that maybe I had made a mistake. I worried about it so much I started to write him another letter to put half of it back into stock funds, but then decided just to wait and see what would happen over the next few weeks.
On Monday October 19, I was on work detail all day so I saw or heard nothing until we got back about the time the six o’clock news was on. I could not believe my eyes. I begged for a phone pass to call my father to make sure he did what I had asked him to do. I got to use the phone around 9:00 p.m. When I finally got through, my father told me that he had made all the transfers the Wednesday before and was so happy he did. He kept asking me ‘How did you know?’ And to be honest I didn’t know. It was just a feeling I had.
Sort of like the same feeling I had when I was released from prison on December 4, 1987. After spending a relaxing weekend in my own home, on Monday I had a feeling I should probably take all the money out of the money market funds and put them back into stock funds. I did no real research, just had a feeling. Well happy to say those two feelings wound up providing my parents and grandparents a financially secure retirement. I never did have such feelings again. I’ve had my ups and downs in the market, but never again have I even tried to time the market. I don’t think that kind of luck would strike twice.
--Bill Briggs, Georgia
Bad Timing, Good Year
I was the executive vice president of a smaller regional broker/dealer. The owner of the firm had gone on vacation that week to Rome Italy to visit the Pope. (He was there with the church choir.) I was faced with many clients calling in wanting to speak to the owner wondering whether or not they should sell out their portfolio. Many were extremely concerned and were looking for guidance. I was able to speak to them and calm all but one of the clients down. I told them that the companies they owned like P&G had not changed overnight because of a crash. These companies still had excellent fundamentals and that this will end up being a wonderful buying opportunity. Many of our clients did. It ended up being one of the highest grossing months we ever had and I would say the majority of our clients were buying. It turned out to be a great year for us.
--John Frey, Cincinnati, OH
Timing The Market
I remember it well. I sold everything I had three weeks before the crash. Why? I don't know. I just had a feeling and I was right.
--Joseph G. Brum, Stockbridge, Georgia
Too Late To Sell
I was at work that day. I remember talking with my husband about it and we knew we couldn’t take any action at that point. The Dow was already down and it made no sense to try to sell off what we had. Thankfully, time was on our side. We just hung in there. The most important lesson to be learned from Black Monday and the subprime mess is that you need to be well diversified and you also need to allocate your investments according to your age, etc. One other hard lesson learned was that we now stay away from investments that aren’t liquid.
--Jan Guglietta, Encinitas, Calif.
I was in the brokerage business working in the Washington D.C. office of Gruntal & Co. I had been a broker for five plus years and saw the market make its bottom in August 1982. I can remember looking at my Quotron and seeing the price of the S&P 500 Index futures saying the market would be 500 points lower. We thought that there must be a problem and called Quotron to notify them there was an error in the information they were providing us. The informed us that the quotes were correct. I was one of the fortunate brokers to not have my clients very invested at the time and actually they had not been very happy for months as we kept them in money market accounts. What a day that was. Although it seemed significant at the time, in the long term it is really meaningless to where we are today.
--Marc A. Freedman, Managing Partner
Can't Stop The Music
"The End of the World As We Know It". Providence, RI welcomed REM for the night and a couple thousand people put the fear out of their minds and postponed the pain for the evening. Within six months investments were above the levels prior to the crash and life was again looking aggressively forward.
I was in high school, my senior year. I worked all summer to save $2,500 and was advised by family to put it in a mutual fund. I watched the value every day before school. Then the day after the crash I opened the morning paper and did a double take. I lost more than half of what it took me to make all summer. I am 37 now and happily invest in stocks only.
--Frank R. Piunno Jr.
I was a junior at the University of Arizona in Tucson working part time as an assistant/gopher for a senior broker at Prudential-Bache Securities. It was my first week on the job and still was trying to understand what the brokerage business was about. I’ll tell you, it was baptism by fire and a scary way to be introduced to the crazy and tumultuous business of the stock market
I specifically remember October 19and the frenzy calls that followed. The subsequent days were a bit frightening when we hired armed guards to secure the entrance, resulting from a few deaths threats from clients—remember we had clients with gun racks. All the senior brokers with window offices feared they might be the clear targets of a disgruntled client with a decent hunting gun, so they decided to work in the pit area with the rookies that week.
I was thinking at the time that this may not be the career path for me and not good for my health. I seriously was expecting to be let go by my boss assuming we lost all of our clients and their money. On the contrary, my boss with 20 years in the business calmly gave me the duty to call our best clients and solicits buy orders (an accepted practice at the time). I was thinking to myself why would anybody buy at a time like! Being the good solider I followed orders and surprisingly most if not all of our largest and savviest clients made huge purchases on stock that got a beating the past few days. The mantra of buy low and sell high started being a real concept right then and there. Those who bought when everybody wanted to sell did very well in the following few months. The lesson I learned that day is twofold: First, take what the market gives you and make it your advantage; and second, the market goes down but it doesn’t stay down so don’t be afraid.
Easy Come, Easy Go
I made and lost my first $1 million in ’87. It took another ten years for me to recover from the shock, just in time for the dot.com boom/bust. However, looking back over the past 20 years, the crash of ’87 doesn’t look nearly as bad as it felt at the time. And yes, I’ve recouped my losses, with a couple million to spare.
--Ron A. Lee
Poised To Pounce
My wife and I had retired to Spain in October 1985, we had a small pension and most of our capital was invested in the UK stock market. When the crash happened, we were unaware as news in Spain at that time was hard to come by. “The Financial Times” took three days to arrive, but a friend telephoned to say, 'Have you heard the news?' We lost on paper 40 percent of our capital, but we never sold a single share. Within 18 months, all of the capital had been recovered. My lasting idea from that episode was never be afraid of taking a profit and remain 30 percent liquid at all times to take advantage of the dips that regularly occur in the market. The future will hold more ups and downs but we shall keep investing.