October 19, 2007
Happy 20th Anniversary to the stock market crash of 1987! It was on this day that the Dow Jones Industrial Average lost 22.6% and I learned lots of the great lessons that I carry with me to this day, including a true understanding and respect for risk and reward. I also learned that just because something has never happened, it does not mean that it can’t. Additionally, I don’t assume that just because something has happened, that it either will or will not recur.
On this day, many are commenting that they don’t believe that there could be another crash of the magnitude of 1987’s drubbing. While I do not foresee another 1987-like crash imminently, I would never be so bold to say that it could never happen again. In fact, there are some eerie similarities between 1987 and 2007. 1987 was the fifth year of a 5-year bull market, as well as the penultimate year of a two-term Republican President. Leading up to the day, there was pressure on the US dollar; the US was running deficits; oil was rising; stocks reached an all-time high in the summer; then sold off and recovered into October. Does any of this sound familiar?
Before you sell the farm, here are the differences: in 1987, the price to earnings ratio of stocks was higher than it is today; Fed policy makers were tightening interest rates in 1987, while today they have started to ease them; and most importantly, bonds were yielding over 10% in 1987 and today they are below 5%. In fact, in 1987, bond yields went from 7.28% to 10.22% in nine months, driven by fears of inflation, whereas today, bond yields have dropped from a high of 5.25% earlier in the year to nearly 4.5% yesterday. Crashes seem most likely after bond yields explode and confidence begins to waver, which probably puts the current chance of a crash at fairly low levels.
In returning to that period of time, it is also important to note that the stock market regained its footing after October 19th. The crash marked the low point for stocks in 1987 and by year-end, the Dow actually showed a gain for the year! Within nine months, stocks recovered all of the losses incurred on October 19th and the US economy never went into a recession as a result of the crash. This is not to say that it was an easy time. Many recall the 1987 crash as short and violent, but it is clear that the months leading up to the event itself could inform those who were paying attention and willing to see a different outcome. I never forgot what another trader said to me in November, 1987: “You do realize that we had all of the information that we needed to make the killer trade of a lifetime.”
I never made the trade of a lifetime, but I was able to use the buoyant commodities market to my advantage, ultimately leaving the firm and trading for myself, until I figured out that it was not the right career for me. My father and his partners sold their business in 1988 and he left the trading floor for good. He formed a new company with one of his former partners, trading from an office with a bunch of his old cronies, but always missed the action of the floor and retired from professional trading five years later. In the end, I would never trade the experience of participating in one of the most important events in the financial markets, so indeed the 20th anniversary is a happy one!
Friday, October 19, 2007
Thursday, October 18, 2007
20 Minus 1
October 18, 2007
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
After a dismal previous week where stocks fell by 10%, on the morning of October 19, 1987, stock “portfolio-insurance” triggers engineered by computerized trading programs were about to start selling to limit downside losses for institutional investors. The dumping of stocks across the board began in Asian markets with Europe following suit. To add more drama to the day, two U.S. warships shelled an Iranian oil platform in the Persian Gulf. I stood in the gold options ring for the 8:20 AM opening, but kept a close eye on the action in the stock and bond markets.
Stocks started selling off from the opening bell and seemed to gain momentum throughout the day. The COMEX closed at 2:30 PM and before the end of the day, my boss ran over and screamed, “Everyone go home long—gold is going to be the only safe haven and after the stock market closes today, money will pour into this market!” Gold closed up approximately $10 that day at $481. Ironically, October 19th was my most profitable day of trading in my short time on the floor. I was able to trade in and out of positions, but to the great disappointment of my boss, I went home flat, not long. I did not mean to disobey him, but in the chaos, I had made a mathematical error, which left me neutral, not long. Luckily, he had to run over to the office to help out the stock trading desk, so I avoided his wrath.
At about 2:35 PM, my beeper rang (this was before cell phones) but I did not recognize the long series of numbers. As I dialed from the booth, I realized that I was making an international call. My father answered the phone to tell me that they were in the Rome airport, waiting to board a flight back to New York. He had touched base with his partner over the weekend and they agreed that it made sense to get back to work ASAP. Unfortunately, on a Sunday, nothing is ASAP in Italy! Never one to lose his sense of humor, he said, “Can you believe that it cost us $400 to hire a car to drive from Florence to Rome—oh well, it’s cheaper than having your mother shop for another week!” Without missing a beat, he said, “Listen honey, I want you and your sister to buy as much IBM and GE as you can in your accounts before the market closes today.”
I called my sister, who was an investment banker at a small boutique firm at the time. She handled the trades for me and then I joined a bunch of COMEX traders to watch the stock market until 4:00 PM. Trading was chaotic with frequent halts and delays due to huge order imbalances and system glitches. At the end of the day, the Dow Jones Industrial Average had plummeted an unprecedented 508 points (22.6%), leaving it at 1738.74. Volume hit 604.3 million shares, almost twice the prior record of 338.5 million set on October 16. Equally as noteworthy was the fact that the Dow had fallen over 36% since the August 25th high.
The press was already calling the day “Black Monday,” a term which one commodities trader noted had its original roots in the gold market. The original Black Friday was September 24, 1869, when a group of financiers tried to corner the gold market and precipitated a business panic followed by a depression. Subsequent panics affecting the financial markets were thereafter referred to as “Black” and the term continues to be used to this day.
To say that the events of October, 1987 shaped me is an understatement. It is rare that any professional investor learns the painful lesson of risk and reward so early in her career. In fact, while everyone had expected that gold would trade higher the next morning, it actually opened limit down (meaning that it dropped $25 before a trade was ever made!) My boss who insisted that we go home long was wrong and by chance, I was the only one of the group who did not lose money on October 20th, when gold closed the day down $16.70 at $464.30. Weeks after the crash, he was relocated back to Chicago and the six young COMEX options traders were left unattended as the firm had bigger issues to tackle at the time.
My father returned to New York with a big check in hand. He and his partners had given back a bunch of money that they had earned, but they were resilient—they were among the survivors who would return to their prior glory by the end of the year. But many were not so lucky. Fortunes were lost, businesses wiped out and all in a matter of days, weeks and months. One of the consequences of the 1987 crash was that trading rules were put in place to help maintain fair and orderly markets and to prevent future panics. But fear and greed, every investor’s favorite emotions, are always with us, so tomorrow I will talk about the lessons to learn from 1987 and discuss whether another crash could occur twenty years hence.
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
After a dismal previous week where stocks fell by 10%, on the morning of October 19, 1987, stock “portfolio-insurance” triggers engineered by computerized trading programs were about to start selling to limit downside losses for institutional investors. The dumping of stocks across the board began in Asian markets with Europe following suit. To add more drama to the day, two U.S. warships shelled an Iranian oil platform in the Persian Gulf. I stood in the gold options ring for the 8:20 AM opening, but kept a close eye on the action in the stock and bond markets.
Stocks started selling off from the opening bell and seemed to gain momentum throughout the day. The COMEX closed at 2:30 PM and before the end of the day, my boss ran over and screamed, “Everyone go home long—gold is going to be the only safe haven and after the stock market closes today, money will pour into this market!” Gold closed up approximately $10 that day at $481. Ironically, October 19th was my most profitable day of trading in my short time on the floor. I was able to trade in and out of positions, but to the great disappointment of my boss, I went home flat, not long. I did not mean to disobey him, but in the chaos, I had made a mathematical error, which left me neutral, not long. Luckily, he had to run over to the office to help out the stock trading desk, so I avoided his wrath.
At about 2:35 PM, my beeper rang (this was before cell phones) but I did not recognize the long series of numbers. As I dialed from the booth, I realized that I was making an international call. My father answered the phone to tell me that they were in the Rome airport, waiting to board a flight back to New York. He had touched base with his partner over the weekend and they agreed that it made sense to get back to work ASAP. Unfortunately, on a Sunday, nothing is ASAP in Italy! Never one to lose his sense of humor, he said, “Can you believe that it cost us $400 to hire a car to drive from Florence to Rome—oh well, it’s cheaper than having your mother shop for another week!” Without missing a beat, he said, “Listen honey, I want you and your sister to buy as much IBM and GE as you can in your accounts before the market closes today.”
I called my sister, who was an investment banker at a small boutique firm at the time. She handled the trades for me and then I joined a bunch of COMEX traders to watch the stock market until 4:00 PM. Trading was chaotic with frequent halts and delays due to huge order imbalances and system glitches. At the end of the day, the Dow Jones Industrial Average had plummeted an unprecedented 508 points (22.6%), leaving it at 1738.74. Volume hit 604.3 million shares, almost twice the prior record of 338.5 million set on October 16. Equally as noteworthy was the fact that the Dow had fallen over 36% since the August 25th high.
The press was already calling the day “Black Monday,” a term which one commodities trader noted had its original roots in the gold market. The original Black Friday was September 24, 1869, when a group of financiers tried to corner the gold market and precipitated a business panic followed by a depression. Subsequent panics affecting the financial markets were thereafter referred to as “Black” and the term continues to be used to this day.
To say that the events of October, 1987 shaped me is an understatement. It is rare that any professional investor learns the painful lesson of risk and reward so early in her career. In fact, while everyone had expected that gold would trade higher the next morning, it actually opened limit down (meaning that it dropped $25 before a trade was ever made!) My boss who insisted that we go home long was wrong and by chance, I was the only one of the group who did not lose money on October 20th, when gold closed the day down $16.70 at $464.30. Weeks after the crash, he was relocated back to Chicago and the six young COMEX options traders were left unattended as the firm had bigger issues to tackle at the time.
My father returned to New York with a big check in hand. He and his partners had given back a bunch of money that they had earned, but they were resilient—they were among the survivors who would return to their prior glory by the end of the year. But many were not so lucky. Fortunes were lost, businesses wiped out and all in a matter of days, weeks and months. One of the consequences of the 1987 crash was that trading rules were put in place to help maintain fair and orderly markets and to prevent future panics. But fear and greed, every investor’s favorite emotions, are always with us, so tomorrow I will talk about the lessons to learn from 1987 and discuss whether another crash could occur twenty years hence.
Wednesday, October 17, 2007
20 Minus 2
October 17, 2007
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
Yesterday we left off in the month of October—at the ripe old age of 21, I had been trading gold options for a whopping three weeks. The first full week of October saw a bond rally fizzle, after which stock investors got spooked. On October 6, the Dow dropped 3.47% to 2548.63 on then-huge volume of 175.6 million shares. Waves of computerized selling made it difficult for the market to maintain equilibrium. Two days later long bond yields stood at 9.91%.
I received a flurry of calls as the trading week starting on October 12th began. Rumors swirled about massive Wall Street layoffs. We all assumed that the easiest people to let go were the newest – we were right. Some of my friends lost their months-old jobs as Salomon Brothers and Kidder Peabody, two of the more aggressive on-campus hiring outfits, were among the first investment banks to announce layoffs, primarily in their bond trading operations. With no available jobs on Wall Street, many started to send away for graduate school applications.
By mid-week, stocks continued to fall. On Wednesday, October 14, the Dow dropped a record 95.46 points to 2412.70, followed by another 58 point loss the next day, taking the index down more than 12% from its all-time high hit on August 25. The financial press blamed the weakening dollar, rising bond prices (both symptoms of the Federal deficit and the balance of trade) and computerized trading as the culprits for the losses. The first two were familiar to investors, but the advent of “portfolio insurance” was a mystifying development for most retail investors. The idea behind portfolio insurance was that institutional investors would sell stock-index futures via computer-driven programs during market declines to limit their losses. Unbeknown to the so-called “Masters of the Universe”, the strategy turned out to be one of the main causes of the unprecedented drop that would soon occur.
On Friday, October 16th, Iranian missiles hit a U.S.-flagged tanker off of the coast of Kuwait. Fears of heightened tensions as a result of the inevitable U.S. retaliation drove the Dow down 108.35 points to close at 2246.74 on record volume. By the close of the week, the yield on the 30-year bond was 10.12%, a level at which many investors were obviously tempted to abandon stocks altogether for a risk-free return. With stocks down over 10% on the week, portfolio-insurance triggers were about to be tripped. Only on Monday would we find out how damaging the “benign” portfolio insurance strategy would be. Over the weekend, my father’s partner called me to confirm the phone number at his hotel in Florence, Italy. I ask how things are going and he responds, “It’s not too good Jillie, but we’ll get through it.”
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
Yesterday we left off in the month of October—at the ripe old age of 21, I had been trading gold options for a whopping three weeks. The first full week of October saw a bond rally fizzle, after which stock investors got spooked. On October 6, the Dow dropped 3.47% to 2548.63 on then-huge volume of 175.6 million shares. Waves of computerized selling made it difficult for the market to maintain equilibrium. Two days later long bond yields stood at 9.91%.
I received a flurry of calls as the trading week starting on October 12th began. Rumors swirled about massive Wall Street layoffs. We all assumed that the easiest people to let go were the newest – we were right. Some of my friends lost their months-old jobs as Salomon Brothers and Kidder Peabody, two of the more aggressive on-campus hiring outfits, were among the first investment banks to announce layoffs, primarily in their bond trading operations. With no available jobs on Wall Street, many started to send away for graduate school applications.
By mid-week, stocks continued to fall. On Wednesday, October 14, the Dow dropped a record 95.46 points to 2412.70, followed by another 58 point loss the next day, taking the index down more than 12% from its all-time high hit on August 25. The financial press blamed the weakening dollar, rising bond prices (both symptoms of the Federal deficit and the balance of trade) and computerized trading as the culprits for the losses. The first two were familiar to investors, but the advent of “portfolio insurance” was a mystifying development for most retail investors. The idea behind portfolio insurance was that institutional investors would sell stock-index futures via computer-driven programs during market declines to limit their losses. Unbeknown to the so-called “Masters of the Universe”, the strategy turned out to be one of the main causes of the unprecedented drop that would soon occur.
On Friday, October 16th, Iranian missiles hit a U.S.-flagged tanker off of the coast of Kuwait. Fears of heightened tensions as a result of the inevitable U.S. retaliation drove the Dow down 108.35 points to close at 2246.74 on record volume. By the close of the week, the yield on the 30-year bond was 10.12%, a level at which many investors were obviously tempted to abandon stocks altogether for a risk-free return. With stocks down over 10% on the week, portfolio-insurance triggers were about to be tripped. Only on Monday would we find out how damaging the “benign” portfolio insurance strategy would be. Over the weekend, my father’s partner called me to confirm the phone number at his hotel in Florence, Italy. I ask how things are going and he responds, “It’s not too good Jillie, but we’ll get through it.”
Tuesday, October 16, 2007
20 minus 3
October 16, 2007
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
When I left off yesterday, it was July, 1987 and I had just started my first job on Wall Street. In preparation for becoming a metals option trader on the Commodities Exchange of NY (COMEX) for Spear, Leeds and Kellogg, I spent time with traders on the floors of the New York Stock Exchange, the American Stock Exchange, the New York Futures Exchange and then a few days with the really big players who traded from off the floor. I remember feeling exhilarated by the action, but overwhelmed by the amount of information that each trader tracked on a daily basis. The story of being called a “*&^%$-ing idiot” during my first week of work is probably better left for another article! Suffice to say that during that memorable exchange, I learned that the 30-year bond yield touched a new high of 8.79%, its highest level since early June.
By mid August, I completed my rotations on the other exchanges and was ready to start clerking on the COMEX floor. The value of the dollar was falling, which was pushing precious metals prices higher (gold was trading above $400), but I remember being a little disappointed because the real action was taking place in stocks, not in commodities. By the end of the month, the celebrations from stock exchanges could practically be heard blocks away, as the Dow Jones Industrial Average reached 2722.4 -- a high that was not breached until exactly two years later on August 24, 1989.
By mid September, my boss decided that he could not be bothered with training and so he gathered the six clerks together before the opening one morning and said, “I can’t deal with any of you right now, so here’s the deal: each of you has a bunch of money in a trading account. This is the firm’s money, not your money. If you lose it, we will fire you. If you don’t make enough money, we’ll fire you. If you make us money, you may keep your job, as long as you stay out of my way. You need to make money before we hire a clerk for you. Until then, you are on your own. Did I mention that I can fire you? Great, so good luck.”
To say that I was nervous was an understatement. I called my dad to ask advice and he said to try to spend a few days observing. He also reminded me that I knew how options work, but since I had never made the buy and sell decisions for myself I should keep my trading to small amounts. I remember almost nothing from the first few days, except that I stood in the gold options ring and barely uttered a word. The silence was broken when a guy shoved me and said, “Are you going actually do anything with that seat that the firm bought you, princess?” Ouch, but it got me to make my first trade – I’m pretty sure that I lost money on it, but it was a start.
By the end of September, I was trading every day, although not in huge quantities. At the same time, the 30-year Treasury reached 9.77%, its highest level since December of 1985 and the Dow had already fallen to 2590.6, 4.8% below the all-time high hit in August. I will never forget my father’s partner saying, “I’m sure glad that September is over!” My father thought about canceling an upcoming trip to Italy, but did not want to disappoint my mother. They were due to depart October 10th.
It is almost twenty years since the largest one-day stock market plunge in history. In honor of the momentous anniversary of October 19, 1987, I am devoting this entire week of articles to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
When I left off yesterday, it was July, 1987 and I had just started my first job on Wall Street. In preparation for becoming a metals option trader on the Commodities Exchange of NY (COMEX) for Spear, Leeds and Kellogg, I spent time with traders on the floors of the New York Stock Exchange, the American Stock Exchange, the New York Futures Exchange and then a few days with the really big players who traded from off the floor. I remember feeling exhilarated by the action, but overwhelmed by the amount of information that each trader tracked on a daily basis. The story of being called a “*&^%$-ing idiot” during my first week of work is probably better left for another article! Suffice to say that during that memorable exchange, I learned that the 30-year bond yield touched a new high of 8.79%, its highest level since early June.
By mid August, I completed my rotations on the other exchanges and was ready to start clerking on the COMEX floor. The value of the dollar was falling, which was pushing precious metals prices higher (gold was trading above $400), but I remember being a little disappointed because the real action was taking place in stocks, not in commodities. By the end of the month, the celebrations from stock exchanges could practically be heard blocks away, as the Dow Jones Industrial Average reached 2722.4 -- a high that was not breached until exactly two years later on August 24, 1989.
By mid September, my boss decided that he could not be bothered with training and so he gathered the six clerks together before the opening one morning and said, “I can’t deal with any of you right now, so here’s the deal: each of you has a bunch of money in a trading account. This is the firm’s money, not your money. If you lose it, we will fire you. If you don’t make enough money, we’ll fire you. If you make us money, you may keep your job, as long as you stay out of my way. You need to make money before we hire a clerk for you. Until then, you are on your own. Did I mention that I can fire you? Great, so good luck.”
To say that I was nervous was an understatement. I called my dad to ask advice and he said to try to spend a few days observing. He also reminded me that I knew how options work, but since I had never made the buy and sell decisions for myself I should keep my trading to small amounts. I remember almost nothing from the first few days, except that I stood in the gold options ring and barely uttered a word. The silence was broken when a guy shoved me and said, “Are you going actually do anything with that seat that the firm bought you, princess?” Ouch, but it got me to make my first trade – I’m pretty sure that I lost money on it, but it was a start.
By the end of September, I was trading every day, although not in huge quantities. At the same time, the 30-year Treasury reached 9.77%, its highest level since December of 1985 and the Dow had already fallen to 2590.6, 4.8% below the all-time high hit in August. I will never forget my father’s partner saying, “I’m sure glad that September is over!” My father thought about canceling an upcoming trip to Italy, but did not want to disappoint my mother. They were due to depart October 10th.
Monday, October 15, 2007
20 minus 4
October 15, 2007:
It is almost twenty years since October 19, 1987, the largest one-day stock market crash in history. The Dow lost 22.6% of its value or $500 billion dollars (I have a photo of the Quotron machine, the precursor to today’s Bloomberg terminal, to prove it!) In honor of the 20th anniversary, I am devoting this entire week of SPOVs to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
I consulted Miss Manners to find that the appropriate gift for a 20th anniversary is china, which strikes me humorous for this anniversary for two reasons: one, it’s just so easy to shatter (a fine metaphor for a market melt-down!) and two, today the word “china” is equated with the fasting growing economy in the world, not a Lenox place setting. That being said, instead of a new set of china, my gift is to use my experience of trading on the floor of a major exchange at that time to help you understand how a boom and subsequent bust can create an indelible memory and form future investment psychology.
I distinctly remember the events leading up to October 19, 1987. When the year started, I was still in college, but I was actively following the stock market because I had worked the previous summer for my father’s specialist firm on the floor of the American Stock Exchange. They were upbeat about the year ahead, after completing a record-breaking one in 1986. I was also trying to pay attention because I had accepted a job trading options on the Commodities Exchange of NY for Spear, Leeds and Kellogg. It was time to trade in the Brown Daily Herald for the Wall Street Journal.
In January, bond yields were near their lowest levels in nine years and there was a vibrant market for junk bonds, the important ingredients in the financing of corporate merger and acquisition activity. The junk bond bonanza was about to crack wide open, as the SEC pursued big players of the junk bond world, including Ivan Boesky, Kidder Peabody and Drexel Burnham Lambert, the firm that made junk bonds popular. A young US Attorney in NY named Rudolph Guliani turned his efforts to Wall Street and would soon become famous for instituting “perp walks” of businessmen in handcuffs.
By the spring, there was a keener focus on the declining value of the US dollar and increasing bond yields, which in April increased above 8% for the first time in 13 months. At the end of April, the dollar and bond prices both plummet after the House of Representatives passes an amendment to take measures to reduce the trade surpluses held by many Asian nations, particularly the Japanese. Despite these concerns, stocks race ever higher and the public is entranced by their returns.
I graduated from college in May and my first day of work was Monday, July 6, 1987. I was fingerprinted, passed the drug test and walked into 4 World Trade Center, where I was outfitted with a bright blue trading jacket and issued my COMEX identification. I had no idea that I was about to participate in a historic period of time.
It is almost twenty years since October 19, 1987, the largest one-day stock market crash in history. The Dow lost 22.6% of its value or $500 billion dollars (I have a photo of the Quotron machine, the precursor to today’s Bloomberg terminal, to prove it!) In honor of the 20th anniversary, I am devoting this entire week of SPOVs to what led up to the crash of 1987, my personal memory of the week and day itself and what lessons we might be able to draw twenty years later as the Dow Jones Industrial Average and the S&P 500 Index are making new highs.
I consulted Miss Manners to find that the appropriate gift for a 20th anniversary is china, which strikes me humorous for this anniversary for two reasons: one, it’s just so easy to shatter (a fine metaphor for a market melt-down!) and two, today the word “china” is equated with the fasting growing economy in the world, not a Lenox place setting. That being said, instead of a new set of china, my gift is to use my experience of trading on the floor of a major exchange at that time to help you understand how a boom and subsequent bust can create an indelible memory and form future investment psychology.
I distinctly remember the events leading up to October 19, 1987. When the year started, I was still in college, but I was actively following the stock market because I had worked the previous summer for my father’s specialist firm on the floor of the American Stock Exchange. They were upbeat about the year ahead, after completing a record-breaking one in 1986. I was also trying to pay attention because I had accepted a job trading options on the Commodities Exchange of NY for Spear, Leeds and Kellogg. It was time to trade in the Brown Daily Herald for the Wall Street Journal.
In January, bond yields were near their lowest levels in nine years and there was a vibrant market for junk bonds, the important ingredients in the financing of corporate merger and acquisition activity. The junk bond bonanza was about to crack wide open, as the SEC pursued big players of the junk bond world, including Ivan Boesky, Kidder Peabody and Drexel Burnham Lambert, the firm that made junk bonds popular. A young US Attorney in NY named Rudolph Guliani turned his efforts to Wall Street and would soon become famous for instituting “perp walks” of businessmen in handcuffs.
By the spring, there was a keener focus on the declining value of the US dollar and increasing bond yields, which in April increased above 8% for the first time in 13 months. At the end of April, the dollar and bond prices both plummet after the House of Representatives passes an amendment to take measures to reduce the trade surpluses held by many Asian nations, particularly the Japanese. Despite these concerns, stocks race ever higher and the public is entranced by their returns.
I graduated from college in May and my first day of work was Monday, July 6, 1987. I was fingerprinted, passed the drug test and walked into 4 World Trade Center, where I was outfitted with a bright blue trading jacket and issued my COMEX identification. I had no idea that I was about to participate in a historic period of time.
Subscribe to:
Posts (Atom)
