We’re coming up on October 19, the 30th anniversary of a hellacious stock market crash. Will the market crash soon? Probably not, its usually trends down for a period before it crashes. That was the case in 1987, when the stock market topped out in August. From John S. Lyons at LyonsSharePro.com via zerohedge.com:
Personal Recollections of the Crash of 1987 on its 30th Anniversary
“There was no ‘smart money’ that day.”
What do the assassination of President John F Kennedy, the beginning of Desert Storm and 9/11 have in common? Provided you are old enough to recall JFK’s assassination, the answer probably is that you remember exactly where you were on the day of those events. If not that old, there is most likely another event that is so memorable that you recall where you were and what you were doing at that moment.
Being in the securities business for many, many years, the Crash of ’87 on October 19th of that year is right up there with JFK’s assassination and 9/11 as one of the mind-numbing catastrophes I’ve witnessed.
In retrospect only, it was fortunate that I had entered the brokerage business in 1969 and immediately weathered a 36% market decline into 1970. On the heels of that decline, I then endured one of the worst bear markets in modern history in 1973-74 when the Dow Jones Industrial Average lost almost 50% of its value. As a result, I was weaned on risk in my new profession. And I learned early on that if a career that centered around the stock market were to be endurable, I had to find a way to practice risk management.
As a result, I developed a risk model during the 1970’s as a means of guarding against such disastrous losses in the future. Fortunately, the model has been of very valuable assistance, protecting clients from every major decline since its inception in 1978. Its Sell Signals have occurred prior to insignificant declines as well, but its risk avoidance guidance supersedes those times. On September 25th of 1987, for example, our model issued a Sell Signal and I sold over half of my clients’ holdings. I was reminded just recently by an associate of mine at that time about how he passed by my office that day and was amazed at the pile of sell orders on my desk.
To continue reading: Personal Recollections From The Crash Of 1987: “There Was No ‘Smart Money’ That Day!”
At the end of that October, I cut out and xeroxed the graph of that month’s Dow movement and sent a copy to the WSJ letter-to-the-editor with the following Mark Twain quote written on it:
“OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February.”
For some reason, my letter was not published.