"Technically, the crash of 1987 bears an uncanny resemblance to the crash of 1929. The shape and extent of the decline and even the day-to-day movements of stock prices track very closely."
-George Soros in The Alchemy of Finance
"The market crash of 1987 caught most economists, scholars, and investment professionals by surprise. Nowhere in the classical, equilibrium-based view of the market so long considered inviolate was there anything that would predict or even describe the events of 1987. The failure of the existing theory left open the potential for competing theories."
-Robert Hagstrom in Investing, the Last Liberal Art
"The President has watched today with concern the continued drop in the stock market. He directed members of his Administration to consult with the chairmen of the Federal Reserve, the Securities and Exchange Commission, the New York Stock Exchange, the Chicago commodities and future exchanges, and the leaders of the investment community.These consultations confirm our view that the underlying economy remains sound. We are in the longest peacetime expansion in history. Employment in at the highest level ever. Manufacturing output is up. The trade deficit, when adjusted for changes in currencies, is steadily improving. And, as the chairman of the Fedreal Reserve has recently stated, there is no evidence of a resurgence of inflation in the United States. The President is keeping close watch on the markets here and in other countries. We will continue to closely monitor these developments."
-Statement released on October 19, 1987 by the Whitehouse
"The fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis."
-Herbert Hoover, after the October 1929 crash
"What do you expect us to do? Annouce that all the Cabinet members will be buying IBM and General Motors tommorrow?
-exasperated Administration official, New York Times, October 20, 1987
"I have never experienced anything like this, so it is difficult to have clear vision. I don't understand it in terms of the fundamentals of the economy"
-Robert Allen, president of AT&T, October 20, 1987
"The borrowing has to stop. The market slide was a shot right between the eyes that had better wake us all up to simple fact that we can't keep romping forever on borrowed money."
-Lee Iacocca, Chrysler Corp Chairman, October 20, 1987
"There is so much psychological togetherness that seems to have worked both on the up side and on the down side. Its a little like a theater where someone yells 'Fire!'"
-Andy Grove, Intel CEO, October 20, 1987
"The market is sending an unequivocal message to the President and the Congress to stop the political games and agree on a Federal deficit-reduction plan."
-Representatvie Dan Rostenkowski, Democrat, October 20, 1987
"An employee on the exchage floor said he was only granting interviews to people with television cameras. "Its busy," he said. " People are on the edge. You don't have the friendliness that you usually have. Everybody is a mad man." A passer-by stopped to ask him how the market was doing, and he quipped: "You can't butt in. I'm going to be a star.""
New York Times article, October 20, 1987
"It's the nearest thing to a meltdown that I ever want to see. We were fortunate this occurred when the American economy is very stong. We are not operating in an environment of weakness."
-John J. Phelan, Chairman of the NYSE, October 20, 1987
"I was walking down the street and I was wondering whether I would see people jumping out of window. Then you realize that nothing is different. But maybe all this will make people serious about real problems, like how to cure AIDS. Maybe it well take the excessive greed out of things for a while." -Harold Snedkof, employee of the New York Public Libarary, October 20
"They should bar buying and selling by programming. They can't stop the selling once it gets going, it's just computers selling to computers. It became a gamble, not an investment anymore. All those guys with 65 credit cards and Porshes who think they are all geniuses at 25 - now see what's happened." -Alexander Kopelman, 80 year old Florida man, October 20, 1987
"Dad got a little upset last night when he got home from work."
-Michael, a law student, October 21, 1987
"It's like shooting the messenger. Program trading is just the obvious villain, but it actually brings the futures market into adjustment with the primary market in New York."
-Merton Miller, University of Chicago Professor, on blaming program trading for the crash
"I knew on Monday it was time to get out. It's like you're in a $25 blackjack game in Las Vegas, and all of sudden you discover you're playing on a $500 table. The stakes are just too high."
-An independent trader, the Merc, October 22, 1987
"As a practical matter, people are looking for whippings boys. Program trading looks mysterious. People don't understand it, so it acquires and image of black magic."
-Joseph Grundfest, SEC commissioner, October 22, 1987
"Stocks fluctuate, next question."
-Alan Greenberg , CEO Bear,Stearns & Co, in response to questions about the crash, October 22, 1987
"You learn how interrelated we all are and how small we are. Nowhere is that exemplified more than people staying up all night to watch the Japanese market to get a feeling for what might happen in the next session of the New York market. The next thing we learn is you can't let computers do all your thinking for you. Part of the decline was triggered or exacerbated by computer-directed trading strategies and they clearly aren't designed to work in markets of this sale and this volatility.
-Donald Marron, Chairman Paine Webber, October 22, 1987
"I was scared this morning. I got wiped out on Monday. Tell your readers that you talked to a broker who is long three houses, and two of them are for sale. My boat is for sale, too."
- A broker quoted in the New York Times, October 23, 1987
"I told my clinets that it was a sucker's market (two days after the crash). A week ago, I would have taken a gamble on anything that looked promising when I was dealing for my own account or for some of my family members. I had been spoiled by the bull market, I never knew anything else. But I bacame a cynic and a skeptic in a hurry."
- A broker, October 23, 1987
"The principal reason for the drop was that common stocks all over the wrold are overvalued. If the market had come down from 2,700 by thirty-seconds of a point, or sixteenths, over a period of time, you wouldn't be writing about this. The real question is why it went so far so fast."
- Nicholas F. Brady, head of the presidential task force into the crash, October 24, 1987
"It makes everyone feel vulnerable, as thinking people. When you see a market get terrribly whacked out, it makes you think how faulty and useless most people's thinking is. It identifies clearly how small we all are, how powerless. It's very distressing."
-Edward Gordon, head of a real-estate company, October 24, 1987
Last week's markets reflected a massive shift in perceptions, not in a any of the fundamentals on which buyers and sellers base their actions. No new information concerning the nation's deficit or its balance of trade appeared; the dollar didn't move violently, and no unsettling pronouncements were made by the President, the Federal Reserve, or foreign leaders. In fact, the same economic backdrop, viewed differently just a few weeks ago, drove the stock market to unprecedented highs.
-Advertisement placed by Drexel Burnham in the October 25, 1987 edition of the New York Times
"I will tell you that, prior to the opening of the market, Mr. Phelan (Chairman of the NYSE) and I had a conversation where he advised me that there was an inordinate number - unbelievable I think was his word - of sell orders coming into their market. That was like an hour before their opening on Monday. So we saw it coming, but who knows who pushed the button to make it happen. I think that button was pushed a million times by a million people."
-Leo Melamed, chairman of the Chicago Merc, October 28, 1987
"Brokers hurling themselves from high windows. Men selling apples on street corners. Silent, shuffling breadlines and shouting crowds outside banks. Even for many of us who did not endure the Great Crash, images of the Depression still flicker across the years. Is that why so many people panicked?"
-Susan Toth, author, October 25, 1987
Does 1987 Equal 1929?
-title of a front page article in the New York Times, October 20, 1997
"Investors had expectations before the 1987 crash that something like a 1929 crash was a possibility, and comparisons with 1929 were an integral part of the phenomenon. It would be wrong to think that the crash could be understood without reference to the expectations engendered by this historical comparison. In a sense many people were playing out an event again that they knew well."
-Economist Robert Shiller
"Adherents of geometric Brownian motion or log normally distributed stock returns (one of the foundation blocks of modern finance) must ever after face a disturbing fact: assuming the hypothesis that stock index returns are log normally distributed with about a 20% annualized volatility, the probability that the stock market could fall 29% (the decline in S&P futures on October 19th, 1987) in a single day is 10-160. So improbable is such an event that it would not be anticipated to occur even if the stock market were to last for 20 billion years, the upper end of the currently estimated duration of the universe. Indeed, such an event should not occur even if the stock market were to enjoy a rebirth for 20 billion years in each of 20 billion big bangs."
-Mark Rubinstein, economist, Comments on the 1987 Stock Market Crash: Eleven Years Later
"Those who thought Black Monday on 1987 was the most frightening day of their lives are forgetting those first few hours of Terrible Tuesday, when the market as we know it simply ceased to exist.... In fact, the dirty little secret of that Tuesday morning is that the screens simply weren't functioning. It was like the Wild West out there. Anything you tried to buy simply went up ahead of you until you caught it and then it would come down so fast that you could lose hundreds of thousands of dollars in mere seconds. I retreated to the sidelines rather than endure that kind of punishment."
-James J. Cramer, founder of theStreet.com
© JPK and Lope