Lest We Forget . . . October 19, 1987

[JEK]

Each Monday, MoneyBeat publishes a short column in the WSJ print edition highlighting a statistic getting traction in the markets. This week’s “big number“ is 3,600, the 1987 stock-market crash’s equivalent point drop in today’s Dow terms.
The anniversary of the 1987 stock-market crash over the weekend offers some perspective on this month’s stock volatility.
The Dow Jones Industrial Average has swung by triple digits in seven of the past 11 trading days, erasing the calm that dominated Wall Street through much of the year. That included the Dow’s biggest one-day drop of the year: a 334-point, or 2%, tumble.
But what felt like stomach-churning action over the past few weeks actually pales in comparison to what transpired 27 years ago.
On Oct. 19, 1987, the Dow dropped 22.6% in a single day, the worst one-day percentage decline in Wall Street history. That equated to a 508-point drop.
If the Dow experienced a similar fall today, it would be the equivalent of a 3,600-point drop.
That fact highlights the point that triple-digit declines aren’t what they used to be. At the Dow’s current levels, a triple-digit swing is roughly a 0.6% move.
“This is not a ‘new normal’ but rather a regular, run of the mill, old-fashioned normal stock market,” Daniel Wiener, chief executive of Adviser Investments, a firm in Newton, Mass., that manages $3.2 billion, wrote to clients earlier this month.
“The Dow points look massive…But we’re talking 1.6% to 2.1% moves, which aren’t really that massive.”
Related: In 2012 on the 25th anniversary of Black Monday, Wall Street Journal reporters E.S. Browning and Steven Russolillo joined Markets Hub for a cross-generational analysis of the event. Here’s a video of the analysis.

 

[RickyG]

"How did you go bankrupt?" Bill asked. "Two ways," Mike said. "Gradually and then suddenly."

 

[stbartshopper]

We remember quite well. One of our best friends was in the market heavily. He and his wife had just showed us their plans to remodel their home. The plans were put on a very long hold. It took him years to earn it back.

 

[T3]

"There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is a part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present."

A Short History of Financial Euphoria, John Kenneth Galbraith

 

[JEK]

Another quote from herein. "It ain't rocket science".

 

[kent1994]

We remember quite well. One of our best friends was in the market heavily. He and his wife had just showed us their plans to remodel their home. The plans were put on a very long hold. It took him years to earn it back.

Not really. The S % P 500 closed on10/19/87 at 225. By 12/31/93, less than 6 years later, the S % P 500 closed at 466. A gain of over 100%. I assume your friends didn't sell ???

 

[MIke R]

A wonderful buying opportunity .....to bad I was too young to be an investor

 

[kent1994]

Yes it was. The public were net sellers of equities from October of 1987 to 12/31/1993, a time when the market doubled. Same thing in the fall of 2008 and spring of 2009. The public has sold trillions in equiites since the fall of 2007. There is now 12 trillion in cash. What did Yogi say "deja vu all over agian".

 

[MIke R]

I was a buyer post 9/11 market opening and that turned out pretty good too for the ol 401k :eagerness:

It all seems to be a pretty simple concept to me.....buy when it's low ...sell when its high....

 

[kent1994]

Simple, but the data suggests done by VERY few.

 

[andynap]

I was a buyer post 9/11 market opening and that turned out pretty good too for the ol 401k :eagerness:

It all seems to be a pretty simple concept to me.....buy when it's low ...sell when its high....

Let me know when its low and when its high

 

[MIke R]

look at the stocks chart ..... It's All there

 

[JEK]

Bernie Madoff comes to mind:

MARKET SWINGS
"Take my word for it, for the most part you can ignore those moves."

 

[kent1994]

Buying and selling might work for some...here are some examples of really boring stocks and what they have done since 10/20/ 1994

Stock Price 10/20/1994 Current Price Bond Equivalent Yield

PG $16.00 $84.00 17.5%

XOM $14.00 $93.00 19.7%

MO $4.75 $47.00 43.7%

PEP $15.00 $94.00 17.4%

JNJ $13.00 $100.00 21.5%


Turn off the tv, throw away the charts, buy high quality CONSERVATIVE companies and relax.

 

[MIke R]

Buying and selling might work for some...here are some examples of really boring stocks and what they have done since 10/20/ 1994

Stock Price 10/20/1994 Current Price Bond Equivalent Yield

PG $16.00 $84.00 17.5%

XOM $14.00 $93.00 19.7%

MO $4.75 $47.00 43.7%

PEP $15.00 $94.00 17.4%

JNJ $13.00 $100.00 21.5%


Turn off the tv, throw away the charts, buy high quality CONSERVATIVE companies and relax.

nah.....mix it up with the tried and true s and the risky ones.....my father in law taught me some of the risky ones aren't risky at all if you know where to look and what to look for.....he bought boatloads of AOL, Intel and Double Click when they were penny stocks and cashed out big.....I bought a lot of the Google Glass provider HIMX for pennies, which topped out at 16 bucks earlier this year and I cashed out .....I love momentum trading to go along with the cornerstone stocks

 

[kent1994]

525% appreciation on a stock like P and G and a 17.5% cash return every year and growing? Turn off the tv and throw away the chart books.

 

[JEK]

nah.....mix it up with the tried and true s and the risky ones.....my father in law taught me some of the risky ones aren't risky at all if you know where to look and what to look for.....he bought boatloads of AOL, Intel and Double Click when they were penny stocks and cashed out big.....I bought a lot of the Google Glass provider HIMX for pennies, which topped out at 16 bucks earlier this year and I cashed out .....I love momentum trading to go along with the cornerstone stocks

When was AOL a penny stock?

 

[JEK]

Or DCLK?

 

[MIke R]

Any stock under five bucks to me is s penny stock ....he is a California tech geek and grabbed that stuff the second if went public

 

[kent1994]

There are very few investors that would not kill for a 17.5% and growing cash flow from a solid, stable company. When Buffet did his hugely successful deal with B of A he got 6%. Oh and did I mention 525% appreciation in addition to the growing cash flow? This is not a company that few understand, it is Procter and Gamble. Don't like P & G? How about some other unknowns like Exxon, Johnson and Johnson or Pepsi?