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A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History
The definitive account of the crash of 1987, a cautionary tale of how the U.S. financial system nearly collapsed--from the bestselling author of The Wizard of Lies
Monday, October 19, 1987, was by far the worst day in Wall Street history. The market fell 22.6 percent – almost twice as bad as the worst day of 1929 – equal to a one-day loss of nearly 5,000 points today.
Black Monday was more than seven years in the making and threatened nearly every U.S. financial institution. Drawing on superlative archival research and dozens of original interviews Diana B. Henriques weaves a tale of missed opportunities, market delusions, and destructive actions that stretched from the “silver crisis” of 1980 to turf battles in Washington, a poisonous rivalry between the New York Stock Exchange and the Chicago Mercantile Exchange, and the almost-fatal success of two California professors whose idea for reducing market risk spun terribly out of control. As the story hurtles forward, the players struggle to forestall a looming market meltdown and unexpected heroes step in to avert total disaster.
For thirty years, investors, regulators, and bankers have failed to heed the lessons of 1987, even as the same patterns have resurfaced, most spectacularly in the financial crisis of 2008. A First-Class Catastrophe offers a new way of looking not only at the past, but at our financial future as well.
Monday, October 19, 1987, was by far the worst day in Wall Street history. The market fell 22.6 percent – almost twice as bad as the worst day of 1929 – equal to a one-day loss of nearly 5,000 points today.
Black Monday was more than seven years in the making and threatened nearly every U.S. financial institution. Drawing on superlative archival research and dozens of original interviews Diana B. Henriques weaves a tale of missed opportunities, market delusions, and destructive actions that stretched from the “silver crisis” of 1980 to turf battles in Washington, a poisonous rivalry between the New York Stock Exchange and the Chicago Mercantile Exchange, and the almost-fatal success of two California professors whose idea for reducing market risk spun terribly out of control. As the story hurtles forward, the players struggle to forestall a looming market meltdown and unexpected heroes step in to avert total disaster.
For thirty years, investors, regulators, and bankers have failed to heed the lessons of 1987, even as the same patterns have resurfaced, most spectacularly in the financial crisis of 2008. A First-Class Catastrophe offers a new way of looking not only at the past, but at our financial future as well.
394 pages, Kindle Edition
First published September 19, 2017
About the author
Diana B. Henriques
9 books76 followersDiana B. Henriques is the author of 'The White Sharks of Wall Street' and 'Fidelity's World.' She is a senior financial writer for The New York Times, having joined the Times staff in 1989.
A Polk Award winner and Pulitzer Prize finalist, Henriques has won several awards for her work on the Times' coverage of the Madoff scandal and was part of the team recognized as a Pulitzer finalist for its coverage of the financial crisis of 2008. She lives in Hoboken, New Jersey.
A Polk Award winner and Pulitzer Prize finalist, Henriques has won several awards for her work on the Times' coverage of the Madoff scandal and was part of the team recognized as a Pulitzer finalist for its coverage of the financial crisis of 2008. She lives in Hoboken, New Jersey.
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April 25, 2018
Fifty-five years ago I became a speculator on Wall Street. I was suffering through graduate school at Columbia University at the time and found it much more enjoyable to watch the ticker tape in a broker’s office rather than hang out in a library on the Columbia campus. Within a short time I graduated from the tame world of gambling on common stocks to more lucrative convertible bonds, silver bullion, and silver futures. All the latter were more highly leveraged than stocks, which meant that I could advance much less of my own money and gamble with more of other people's. Within a few years, my net worth rose from $2,000, which I’d earned when I sold the coin collection I’d amassed as a teenager, to the equivalent in 2018 of $1.2 million. All that experience initiated me into the arcane world of high finance.
(For the record, just in case you have any fantasy about asking me for some of it: all the money I made in the 1960s was gone by 1973, most of it to finance a short-lived nonprofit organization.)
Wall Street, from the 1960s to today
Wall Street today bears little resemblance to the financial world of the 60s. When I began trading stocks in 1963, the trading volume at the New York Stock Exchange on a typical day was around four million shares. Today, in 2018, more than one billion shares change hands on pretty much every day at the NYSE—over 250 times as much activity. Half a century ago, common stock and bonds dominated the financial markets. Of course, there were several different types of bonds, and the more discriminating speculator might make use of futures contracts known as “puts” and “calls.” (Today, calls are more familiar as stock options of the sort now frequently granted to corporate executives.) Nowadays, there is a bewildering array of financial instruments including index funds, exchange-traded funds, "collateralized debt obligations," and a large variety of other derivatives that are difficult to understand without a specialized background in finance. Even if you’re unfamiliar with financial history, you may recognize the word derivative, since the widespread use of such devices has been identified (along with subprime lending) as one of the central causes of the Great Recession beginning in 2008.
The commodities markets have similarly mushroomed over time. The commodities markets of the 1960s thrived on futures contracts, but trading was typically limited to a few agricultural products (such as hog bellies or soybeans), petroleum, and metals, including copper, silver, and steel. Today the commodities exchanges offer a wider variety of futures contracts in physical products. But, most notably (and irrationally), they feature financial futures, such as currency futures, interest rate futures and stock market index futures. All these instruments are known collectively as derivatives.
These and other changes that began to accumulate in the financial markets in the 1980s would prove to have disastrous consequences in the years ahead, as we know all too well from recent experience. But proof of the danger would come far earlier, in October 1987.
“The worst day in stock market history”
Immediately below is a chart of the Dow Jones Industrial Average, year by year, from 1928 to 2018. If you look very, very closely, you may find somewhere along the gently upward-sloping curve of the 1980s what looks like a modest decline in the average. See it? You'll have to squint. Even then, maybe not. It looks like a tiny inverted "V" about two-thirds of the way from left to right. I've chosen a small version of the chart to emphasize just how small that drop in the market seems over the long haul.
However, that seemingly modest decline encompassed what Diana B. Henriques calls “the worst day in Wall Street history” in her history of the period, A First-Class Catastrophe. On Black Monday, October 19, 1987, the Dow collapsed, falling a record 508 points. By 21st-century standards, that number is indeed modest. From 1998 to 2018, at least twenty days have seen larger point declines. However, in October 1987, 508 points represented the largest percentage decline in the history of the average. On that single day, the most widely-watched financial indicator in the world dropped a staggering 22.6%. And the loss for the week was even greater: “the worst one-week decline in Wall Street history.” Panic spread around the world, with other closely-followed stock market indices down even more sharply in the UK, Hong Kong, Australia, Spain, and New Zealand. It was, indeed, a first-class catastrophe. For months afterward, as government officials and financial executives everywhere scrambled to make sense of what went wrong, fear was widespread that a deep recession might not be far behind. In fact, two years went by before the Dow recovered its pre-Black Monday level.
The most lucid financial history in many years
Thirty years after the event, it’s easy to question why anyone would write a nearly 400-page book about that day, “the worst day ever” notwithstanding. However, Henriques explains in vivid terms just how important it is to understand what went awry in October 1987, since the problems that caused Black Monday are essentially the same as those at the root of the Great Recession triggered by the stock market crash of 2008. In some ways, those problems have gotten worse—and for the most part they have not been corrected by any legislation, any self-regulation in the financial industry, or any White House action since 2008. (Some modest reforms were incorporated into the legislation known as Dodd-Frank, but even those are now under fire and may well be eliminated by the current US Congress.)
A First-Class Catastrophe should be essential reading for anyone who is serious about investing in the financial markets. It’s the most lucid and easily understood example of financial history that I’ve read in many years. It is, simply, masterful. Another author might have told the story in terms of numbers and jargon. Henriques’ account focuses on people. The book begins with a lengthy cast of characters that seems daunting at first but proves to be simply useful. The principal characters on that list emerge as living, breathing human beings on the pages of this superb book: regulators like Paul Volcker and Alan Greenspan at the Federal Reserve, top financial industry executives, the president of the New York Stock Exchange, the chief investment officers at giant pension funds, and two professors in the business school at the University of California, Berkeley.
The root causes of the stock market crash of 1987
The proliferation of derivatives was unquestionably a root cause of Black Monday. Many of these new financial devices were either entirely unregulated or encouraged by regulators who were captive to the industries they oversaw. (Remember that Ronald Reagan was in the White House in 1987 and had been for six years at that point, affording him ample time to reshape the government’s response to the financial markets to suit his antipathy to regulation.) In 1987, the principal culprits were computer-assisted trading, “academic theories that led giant herds of investors to pursue the same strategies at the same time with vast amounts of money,” and futures contracts pegged to the Dow and the Standard & Poor’s 500. These and other “financial futures had fundamentally changed the way the traditional stock market worked” in less than five years.
What Black Monday also brought to light was “a regulatory community that was poorly equipped, ridiculously fragmented, technologically naïve, and fatally focused on protecting turf rather than safeguarding the overall market’s internal machinery,” Henriques explains. Quite simply, there were (and are) far too many official regulators that oversee the financial industry: the Federal Reserve Bank, Federal Deposit Insurance Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, Securities and Exchange Commission, Commodity Futures Trading Commission, Financial Industry Regulatory Authority, state bank regulators, and state insurance regulators. Small wonder that they didn’t (and don’t) act in concert, even during the most spectacular crises. A disaster on the order of the Great Recession was averted in October 1987 only through “a makeshift web of trust, pluck, and improvisation—and perhaps a few bits of inspired subterfuge here and there.”
A government task force assembled by the Reagan Administration concluded “that technology and financial innovation had welded once-separate markets [primarily the stock and commodities markets] into a single marketplace, but government, the financial industry, and academia had failed to see what had happened and adapt to it.” Henriques notes in her epilogue that “Unfortunately, we cannot simply turn the page on the crash of 1987, because we are still living in the world revealed to us on Black Monday.” If anything, conditions have deteriorated since then. The crash of 2008 and the ensuing Great Recession make that point all too emphatically.
Diana B. Henriques has reported and written for the New York Times since 1989, where she won a Pulitzer Prize for her reporting on the aftermath of 9/11. A First-Class Catastrophe is her fourth book. A popular, earlier effort, The Wizard of Lies: Bernie Madoff and The Death of Trust, was published in 2011.
(For the record, just in case you have any fantasy about asking me for some of it: all the money I made in the 1960s was gone by 1973, most of it to finance a short-lived nonprofit organization.)
Wall Street, from the 1960s to today
Wall Street today bears little resemblance to the financial world of the 60s. When I began trading stocks in 1963, the trading volume at the New York Stock Exchange on a typical day was around four million shares. Today, in 2018, more than one billion shares change hands on pretty much every day at the NYSE—over 250 times as much activity. Half a century ago, common stock and bonds dominated the financial markets. Of course, there were several different types of bonds, and the more discriminating speculator might make use of futures contracts known as “puts” and “calls.” (Today, calls are more familiar as stock options of the sort now frequently granted to corporate executives.) Nowadays, there is a bewildering array of financial instruments including index funds, exchange-traded funds, "collateralized debt obligations," and a large variety of other derivatives that are difficult to understand without a specialized background in finance. Even if you’re unfamiliar with financial history, you may recognize the word derivative, since the widespread use of such devices has been identified (along with subprime lending) as one of the central causes of the Great Recession beginning in 2008.
The commodities markets have similarly mushroomed over time. The commodities markets of the 1960s thrived on futures contracts, but trading was typically limited to a few agricultural products (such as hog bellies or soybeans), petroleum, and metals, including copper, silver, and steel. Today the commodities exchanges offer a wider variety of futures contracts in physical products. But, most notably (and irrationally), they feature financial futures, such as currency futures, interest rate futures and stock market index futures. All these instruments are known collectively as derivatives.
These and other changes that began to accumulate in the financial markets in the 1980s would prove to have disastrous consequences in the years ahead, as we know all too well from recent experience. But proof of the danger would come far earlier, in October 1987.
“The worst day in stock market history”
Immediately below is a chart of the Dow Jones Industrial Average, year by year, from 1928 to 2018. If you look very, very closely, you may find somewhere along the gently upward-sloping curve of the 1980s what looks like a modest decline in the average. See it? You'll have to squint. Even then, maybe not. It looks like a tiny inverted "V" about two-thirds of the way from left to right. I've chosen a small version of the chart to emphasize just how small that drop in the market seems over the long haul.
However, that seemingly modest decline encompassed what Diana B. Henriques calls “the worst day in Wall Street history” in her history of the period, A First-Class Catastrophe. On Black Monday, October 19, 1987, the Dow collapsed, falling a record 508 points. By 21st-century standards, that number is indeed modest. From 1998 to 2018, at least twenty days have seen larger point declines. However, in October 1987, 508 points represented the largest percentage decline in the history of the average. On that single day, the most widely-watched financial indicator in the world dropped a staggering 22.6%. And the loss for the week was even greater: “the worst one-week decline in Wall Street history.” Panic spread around the world, with other closely-followed stock market indices down even more sharply in the UK, Hong Kong, Australia, Spain, and New Zealand. It was, indeed, a first-class catastrophe. For months afterward, as government officials and financial executives everywhere scrambled to make sense of what went wrong, fear was widespread that a deep recession might not be far behind. In fact, two years went by before the Dow recovered its pre-Black Monday level.
The most lucid financial history in many years
Thirty years after the event, it’s easy to question why anyone would write a nearly 400-page book about that day, “the worst day ever” notwithstanding. However, Henriques explains in vivid terms just how important it is to understand what went awry in October 1987, since the problems that caused Black Monday are essentially the same as those at the root of the Great Recession triggered by the stock market crash of 2008. In some ways, those problems have gotten worse—and for the most part they have not been corrected by any legislation, any self-regulation in the financial industry, or any White House action since 2008. (Some modest reforms were incorporated into the legislation known as Dodd-Frank, but even those are now under fire and may well be eliminated by the current US Congress.)
A First-Class Catastrophe should be essential reading for anyone who is serious about investing in the financial markets. It’s the most lucid and easily understood example of financial history that I’ve read in many years. It is, simply, masterful. Another author might have told the story in terms of numbers and jargon. Henriques’ account focuses on people. The book begins with a lengthy cast of characters that seems daunting at first but proves to be simply useful. The principal characters on that list emerge as living, breathing human beings on the pages of this superb book: regulators like Paul Volcker and Alan Greenspan at the Federal Reserve, top financial industry executives, the president of the New York Stock Exchange, the chief investment officers at giant pension funds, and two professors in the business school at the University of California, Berkeley.
The root causes of the stock market crash of 1987
The proliferation of derivatives was unquestionably a root cause of Black Monday. Many of these new financial devices were either entirely unregulated or encouraged by regulators who were captive to the industries they oversaw. (Remember that Ronald Reagan was in the White House in 1987 and had been for six years at that point, affording him ample time to reshape the government’s response to the financial markets to suit his antipathy to regulation.) In 1987, the principal culprits were computer-assisted trading, “academic theories that led giant herds of investors to pursue the same strategies at the same time with vast amounts of money,” and futures contracts pegged to the Dow and the Standard & Poor’s 500. These and other “financial futures had fundamentally changed the way the traditional stock market worked” in less than five years.
What Black Monday also brought to light was “a regulatory community that was poorly equipped, ridiculously fragmented, technologically naïve, and fatally focused on protecting turf rather than safeguarding the overall market’s internal machinery,” Henriques explains. Quite simply, there were (and are) far too many official regulators that oversee the financial industry: the Federal Reserve Bank, Federal Deposit Insurance Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, Securities and Exchange Commission, Commodity Futures Trading Commission, Financial Industry Regulatory Authority, state bank regulators, and state insurance regulators. Small wonder that they didn’t (and don’t) act in concert, even during the most spectacular crises. A disaster on the order of the Great Recession was averted in October 1987 only through “a makeshift web of trust, pluck, and improvisation—and perhaps a few bits of inspired subterfuge here and there.”
A government task force assembled by the Reagan Administration concluded “that technology and financial innovation had welded once-separate markets [primarily the stock and commodities markets] into a single marketplace, but government, the financial industry, and academia had failed to see what had happened and adapt to it.” Henriques notes in her epilogue that “Unfortunately, we cannot simply turn the page on the crash of 1987, because we are still living in the world revealed to us on Black Monday.” If anything, conditions have deteriorated since then. The crash of 2008 and the ensuing Great Recession make that point all too emphatically.
Diana B. Henriques has reported and written for the New York Times since 1989, where she won a Pulitzer Prize for her reporting on the aftermath of 9/11. A First-Class Catastrophe is her fourth book. A popular, earlier effort, The Wizard of Lies: Bernie Madoff and The Death of Trust, was published in 2011.
May 29, 2018
(4.5) Excellent account of Black Monday (1987 stock market crash). Great history lesson/scary financial campfire story.
Really appreciated the coverage of the regulatory and financial engineering context of the prior decade leading up to the big events of the late 80s. Henriques really covers this background well, making the actual events much easier to understand. Unfortunately, also make it clear that the response (or really total lack thereof) of the event was terribly inadequate--as seen by later crashes and crises. The epilogue is really a teaser for a great read about the 2008 financial crisis (I recommend Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis — and Themselves), which essentially picks up immediately after the 1987-1989 slow recovery. After covering the background, she shifts to a narrative-like account of the days leading up to Black Monday and the terrible financial week that it began.
Only had a few disappointments in her explanations of things. An early description of how futures work seemed oversimplified if not actually incorrect. There was one other super minor thing, but overall really well written account.
Eye-opening was that as bad as that week in October went, it could have been far, far worse. And almost was. She gives every detail necessary to understand the following passage (which should make you shiver just a little):
Really appreciated the coverage of the regulatory and financial engineering context of the prior decade leading up to the big events of the late 80s. Henriques really covers this background well, making the actual events much easier to understand. Unfortunately, also make it clear that the response (or really total lack thereof) of the event was terribly inadequate--as seen by later crashes and crises. The epilogue is really a teaser for a great read about the 2008 financial crisis (I recommend Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis — and Themselves), which essentially picks up immediately after the 1987-1989 slow recovery. After covering the background, she shifts to a narrative-like account of the days leading up to Black Monday and the terrible financial week that it began.
Only had a few disappointments in her explanations of things. An early description of how futures work seemed oversimplified if not actually incorrect. There was one other super minor thing, but overall really well written account.
Eye-opening was that as bad as that week in October went, it could have been far, far worse. And almost was. She gives every detail necessary to understand the following passage (which should make you shiver just a little):
Catastrophe had been averted, not through careful political oversight and astute regulatory foresight, but through sheer luck: an eleventh-hour deal with an options trader in Hong Kong; a belated willingness to compromise at the Bank of England [regarding the pricing of newly privatized BP stock]; an extremely persuasive Irishman at the New York Fed; a pension fund manager who may have shown uncommon restraint; two momentarily cooperative stock-trading rivals in Manhattan; and, in Chicago, some time-tested friendships, a few bankers willing to defy their regulators and their own fears, a timely payment by Goldman Sachs, and one fortunately timed purchase in the Major Market Index pit at the Chicago Board of Trade.
Subtract even one of those elements, and the aftermath of Black Monday would have been cataclysmic for the nation's financial system.
January 19, 2023
I have no idea what I just read. My mind has gaps. I gave 4 stars because she is so thorough. But one moment I am yawning; then a chapter of financial drama!! with a cliff hanger that this has not been fixed yet and is leading up to the DAYs in Oct 1987. Yawn, drama! yawn, drama! By the time I got to the crash, it was over and I was kind of ticked off. I may need to read Metz's book, Black Monday, that just focuses on the particular crash.
September 20, 2021
A pretty engaging read of what could be a hopeless jumble of regulations and derivatives, pretty centrist in her outlook
September 3, 2024
Adding this to the list of non fiction that I ask my parents if they remember
January 23, 2018
What were you doing, what were you thinking, what can you recall about those unique moments in history when a major event or disaster occurs? The assassination of JFK, MLK, and RFK?
9-11? The collapse of the banking, credit, and financial markets in 20008? The days a parent died unexpectedly? basketball game where you made a shot from half-court at the precise second the buzzer sounded? These truly momentous events I can recall very clearly even though JFK's assassination was more than 54 years ago, and even though my half-court basket at the buzzer was 56 years ago. I remember.
And, I remember as though it were yesterday, the morning of October 19, 1987, when the Dow Jones Industrial average collapsed, falling more than 1300 points during the trading day and closing more than 508 points (22%) below the prior day's close. Where was I? I was eating breakfast with my family at the Seaside, Oregon Shilo Inn overlooking the foggy shores of the Pacific, when I excused myself to answer a call from my broker who told me, in effect, that even though the world was coming to an end, not to sell, not to worry, and just chill. I remember returning to Portland and checking quotes and technical information on a data feeder called the Quotron at a Merrill Lynch office inquiring whether they heard of anyone jumping out the window that day. Market activity truly does affect people differently.
The arguments at the time about what caused that momentous collapse (the intraday collapse was truly breathtaking) mysteries remained: what caused this collapse that almost brought markets to the point of cessation, that caused specialist firms either to be bought by other firms or brought specialists to either ruin, bankruptcy, or financial challenges for months to come?
Henriques, as she did in segmenting and dissecting the scams carried out by Bernard Madoff, does a masterful job of what I think of as financial forensic pathology. He understands that financial, banking, and capital markets require liquidity; that the introduction of the electronic DOT (basically the ordering and selling of shares electronically) just prior to the October sell-off contributed to it; that portfolio insurance complicated if not prevented index arbitrage from softening the impacts; and a host of other factors that merged to create a market not only susceptible to the type and quality of the decline witnessed that day, but almost required that outcome.
Her understanding of the role of Chicago's Continental Illinois' purchase of First Options and its mega-role in liquifying Chicago's commodities trading firms with credit and loans is something that I believe was not understood at the time. As we all know, the lessons learned in the 1800s about how the Bank of England intervened in times panics and crashes (lend to anyone with both hands with the promise only that they will spend it, not hoard it), lessons recited in Lombard Street and applicable in every way today, were symbolized in how lenders, banks, the exchanges themselves, and credit markets are the source of liquidity which is the fodder for mares, so to speak. Henriques, better than anyone I read at the time of the Crash and since, understands this relationship to market dynamics. She is correct is correct in criticizing the rigidity of the Comptroller and praise the wisdom of Jerry Corrigan and Paul Volker, both of whom understood markets and the need for liquidity in troubled financial time, and John Phelan for insisting, after brief hesitation, that all stocks had to open for trading before a "paperwork catch-up" holiday could be imposed. Public confidence in the markets required nothing less.
Henriques also has it right when she cites the trading settlement procedures at the CBT and Merc, and the opening of the DOT (Designated Order Turnaroud) system to large block trades, even though the small amount of beta testing that took place did not justify opening DOT to large (100,000+) block trades. Today, the system at the stock exchanges and the various Chicago commodities trading platforms are electronic, and the systems handles 1M+ trades as needed. Electronic trading came of age in the 2000s and has never looked back.
What she does not do and what I believe she may not understand is the role played by technical market dynamics that generated a level of extreme optimism, beginning well before the October 19, 1987, price collapse, that really meant that the market would have had a momentous decline with or without the factors she identifies. In reality, those factors, aided by the sheer exhaustion of it all, exacerbated what was likely to be a severe correction into a severe correction that nearly extinguished the ability of the trading markets in stocks, commodities, bonds, and credit to persist and survive.
In the normal evolution of market cycles, trading ultimately moves from bust to boom to bust again. These cycles are fed in part by fundamental factors--why are oil and lumber prices rising but corn and oats lethargic, and can money be made from that anomaly? Central to the concept of functioning markets, however, is human behavior: traders are humans who move from rational and calm decision making to irrational behaviours. Traders cautiously trade when prices move slowly, at first, expanding with volume later, and booming in a way that brings unsuspecting and perhaps less experienced traders into the markets. Sentiment follows the consistent price rises to the point that investment advisors, brokers, investment letter writers, and the retail customers have committed all or most of their capital to what may look like a joyride that will last forever and allow people to retire from work long before their eligibility for Medicare and Social Security benefits arrive.
This is exactly the state of the stock markets beginning in August, 1987 and continuing for weeks afterward. Sentiment then--as it is now--was at extreme levels. Louis Rukeyser, the host of the phenomenally popular Wall Street Week television show on public television along with Bob Nurock, his market technical advisor, and Marty Zweig, the worry-wort who appear worried just as viewers and traders alike began to enjoy themselves, warned viewers in weeks preceding the crash that while everyone was very happy, his "elves" were starting to concede that market caution was the better approach. Indeed, in the Friday before the crash on October 19, the technical market elves, Nurock's creation, stood at -2, an omen. The Friday after, it rose to +6, an augur that the market would turn around, even if not quickly. Indeed, market dynamics, an intraday selling climax on the 19th, continuing as a fierce rally on October 20-21, did what panicked markets inevitably do: over the months following, the Dow and other Indices (SP 500/Nasdaq/NYSE Composite) all returned to the low point attained on October 19's intraday trading, well below the point where the market closed on October 19, but done is a soft, almost casual way with very little volume.
Henriques missed or ignored all this in her book. Rational and irrational decisions are the grist of these trading markets in stocks, bonds, commodities, and financial products including options, mortgages, and credit. Ignoring this does not detract from the contribution the book makes, because, even in markets ruled by human behaviour and sentiment, there is, on the day given for a panic in the markets, forces at work that drive prices and decision making, and can result in the severe liquidity problems brought on by that day's irrationality. But, it does leave the question Henriques tries to answer unresolved, namely what brought about the Crash of 1987. It is a mistake, though, to underestimate or ignore human decisionmaking, sentiment, and behaviour, in all matters where people create dynamics
9-11? The collapse of the banking, credit, and financial markets in 20008? The days a parent died unexpectedly? basketball game where you made a shot from half-court at the precise second the buzzer sounded? These truly momentous events I can recall very clearly even though JFK's assassination was more than 54 years ago, and even though my half-court basket at the buzzer was 56 years ago. I remember.
And, I remember as though it were yesterday, the morning of October 19, 1987, when the Dow Jones Industrial average collapsed, falling more than 1300 points during the trading day and closing more than 508 points (22%) below the prior day's close. Where was I? I was eating breakfast with my family at the Seaside, Oregon Shilo Inn overlooking the foggy shores of the Pacific, when I excused myself to answer a call from my broker who told me, in effect, that even though the world was coming to an end, not to sell, not to worry, and just chill. I remember returning to Portland and checking quotes and technical information on a data feeder called the Quotron at a Merrill Lynch office inquiring whether they heard of anyone jumping out the window that day. Market activity truly does affect people differently.
The arguments at the time about what caused that momentous collapse (the intraday collapse was truly breathtaking) mysteries remained: what caused this collapse that almost brought markets to the point of cessation, that caused specialist firms either to be bought by other firms or brought specialists to either ruin, bankruptcy, or financial challenges for months to come?
Henriques, as she did in segmenting and dissecting the scams carried out by Bernard Madoff, does a masterful job of what I think of as financial forensic pathology. He understands that financial, banking, and capital markets require liquidity; that the introduction of the electronic DOT (basically the ordering and selling of shares electronically) just prior to the October sell-off contributed to it; that portfolio insurance complicated if not prevented index arbitrage from softening the impacts; and a host of other factors that merged to create a market not only susceptible to the type and quality of the decline witnessed that day, but almost required that outcome.
Her understanding of the role of Chicago's Continental Illinois' purchase of First Options and its mega-role in liquifying Chicago's commodities trading firms with credit and loans is something that I believe was not understood at the time. As we all know, the lessons learned in the 1800s about how the Bank of England intervened in times panics and crashes (lend to anyone with both hands with the promise only that they will spend it, not hoard it), lessons recited in Lombard Street and applicable in every way today, were symbolized in how lenders, banks, the exchanges themselves, and credit markets are the source of liquidity which is the fodder for mares, so to speak. Henriques, better than anyone I read at the time of the Crash and since, understands this relationship to market dynamics. She is correct is correct in criticizing the rigidity of the Comptroller and praise the wisdom of Jerry Corrigan and Paul Volker, both of whom understood markets and the need for liquidity in troubled financial time, and John Phelan for insisting, after brief hesitation, that all stocks had to open for trading before a "paperwork catch-up" holiday could be imposed. Public confidence in the markets required nothing less.
Henriques also has it right when she cites the trading settlement procedures at the CBT and Merc, and the opening of the DOT (Designated Order Turnaroud) system to large block trades, even though the small amount of beta testing that took place did not justify opening DOT to large (100,000+) block trades. Today, the system at the stock exchanges and the various Chicago commodities trading platforms are electronic, and the systems handles 1M+ trades as needed. Electronic trading came of age in the 2000s and has never looked back.
What she does not do and what I believe she may not understand is the role played by technical market dynamics that generated a level of extreme optimism, beginning well before the October 19, 1987, price collapse, that really meant that the market would have had a momentous decline with or without the factors she identifies. In reality, those factors, aided by the sheer exhaustion of it all, exacerbated what was likely to be a severe correction into a severe correction that nearly extinguished the ability of the trading markets in stocks, commodities, bonds, and credit to persist and survive.
In the normal evolution of market cycles, trading ultimately moves from bust to boom to bust again. These cycles are fed in part by fundamental factors--why are oil and lumber prices rising but corn and oats lethargic, and can money be made from that anomaly? Central to the concept of functioning markets, however, is human behavior: traders are humans who move from rational and calm decision making to irrational behaviours. Traders cautiously trade when prices move slowly, at first, expanding with volume later, and booming in a way that brings unsuspecting and perhaps less experienced traders into the markets. Sentiment follows the consistent price rises to the point that investment advisors, brokers, investment letter writers, and the retail customers have committed all or most of their capital to what may look like a joyride that will last forever and allow people to retire from work long before their eligibility for Medicare and Social Security benefits arrive.
This is exactly the state of the stock markets beginning in August, 1987 and continuing for weeks afterward. Sentiment then--as it is now--was at extreme levels. Louis Rukeyser, the host of the phenomenally popular Wall Street Week television show on public television along with Bob Nurock, his market technical advisor, and Marty Zweig, the worry-wort who appear worried just as viewers and traders alike began to enjoy themselves, warned viewers in weeks preceding the crash that while everyone was very happy, his "elves" were starting to concede that market caution was the better approach. Indeed, in the Friday before the crash on October 19, the technical market elves, Nurock's creation, stood at -2, an omen. The Friday after, it rose to +6, an augur that the market would turn around, even if not quickly. Indeed, market dynamics, an intraday selling climax on the 19th, continuing as a fierce rally on October 20-21, did what panicked markets inevitably do: over the months following, the Dow and other Indices (SP 500/Nasdaq/NYSE Composite) all returned to the low point attained on October 19's intraday trading, well below the point where the market closed on October 19, but done is a soft, almost casual way with very little volume.
Henriques missed or ignored all this in her book. Rational and irrational decisions are the grist of these trading markets in stocks, bonds, commodities, and financial products including options, mortgages, and credit. Ignoring this does not detract from the contribution the book makes, because, even in markets ruled by human behaviour and sentiment, there is, on the day given for a panic in the markets, forces at work that drive prices and decision making, and can result in the severe liquidity problems brought on by that day's irrationality. But, it does leave the question Henriques tries to answer unresolved, namely what brought about the Crash of 1987. It is a mistake, though, to underestimate or ignore human decisionmaking, sentiment, and behaviour, in all matters where people create dynamics
August 5, 2020
Narrative history of October 19, 1987 stock market crash. Tale begins with the Hunt brothers silver debacle of March 1980. Silver had gone from below $10 an ounce in August of 1979, spiked to $50 in January of 1980*and retreated back to $10.80 by March 25, 1980. The precipitous move had been generally fueled by the perception of silver as a hedge against inflation. The heavily leveraged Hunt brothers got caught when the tide went out. They owned, on paper, a whole lot of silver priced a whole lot higher than $10.80 an ounce and couldn’t make good. The collapse was such that they had to get bailed out to the tune of $1.1 billion by a consortium of banks with a loan engineered by the the Federal Bank and the CFTC to prevent several other banks from failing. The loan was largely secured by the Hunt brothers’ oil company. Put that way, it all sounds much more orderly than it was. The stock market had fits and there were hearings before the House of Representatives.
Henriques is a very good writer and labors admirably to make discussion of politics and regulatory maneuvering, where her sympathies lie, palatable. (“Oh those brave, steady, mature, reliable regulators!”). She seems to find the other half of her story, speculators and traders, distasteful. (“Chicago pit gypsies.”) She has little taste for the shallow, greedy people that actually made their livings trading futures and securities, giving them no credit for giving her heroic regulators someone to regulate, and herself a story to tell. She’s just one of those people who loves to wrinkle her nose, peer over her glasses and slowly shake her head. She stubbornly and at great length disputes the theory that markets are rational; she finds volatility irrational (!), and is sorely distressed as she depicts arbitragers selling the S&P 500 stocks and simultaneously buying the corresponding, undervalued S&P 500 future, locking in the discrepancy as profit. How dare they!
Still, philosophical differences aside, this is an authoritative volume, covering an enormous amount of material but still containing an interesting, readable narrative thread. Fascinating market history, if you like that sort of thing.
——
*In response to a friend ‘s query I reviewed the book for some mention of Comex Silver Rule 7 of January 7, 1980, “placing heavy restrictions on the purchase of commodities on margin,” (“Silver Thursday,” Wikipedia) and found nothing. Did I miss it? It seems a significant omission on Ms. Henriques’ part. A trader with a long memory recalls the Comex “powers that be” as being short silver, thus the rule change. In other words, the Hunt brothers were pushed, or at least nudged over the edge of the cliff.
Henriques is a very good writer and labors admirably to make discussion of politics and regulatory maneuvering, where her sympathies lie, palatable. (“Oh those brave, steady, mature, reliable regulators!”). She seems to find the other half of her story, speculators and traders, distasteful. (“Chicago pit gypsies.”) She has little taste for the shallow, greedy people that actually made their livings trading futures and securities, giving them no credit for giving her heroic regulators someone to regulate, and herself a story to tell. She’s just one of those people who loves to wrinkle her nose, peer over her glasses and slowly shake her head. She stubbornly and at great length disputes the theory that markets are rational; she finds volatility irrational (!), and is sorely distressed as she depicts arbitragers selling the S&P 500 stocks and simultaneously buying the corresponding, undervalued S&P 500 future, locking in the discrepancy as profit. How dare they!
Still, philosophical differences aside, this is an authoritative volume, covering an enormous amount of material but still containing an interesting, readable narrative thread. Fascinating market history, if you like that sort of thing.
——
*In response to a friend ‘s query I reviewed the book for some mention of Comex Silver Rule 7 of January 7, 1980, “placing heavy restrictions on the purchase of commodities on margin,” (“Silver Thursday,” Wikipedia) and found nothing. Did I miss it? It seems a significant omission on Ms. Henriques’ part. A trader with a long memory recalls the Comex “powers that be” as being short silver, thus the rule change. In other words, the Hunt brothers were pushed, or at least nudged over the edge of the cliff.
November 4, 2019
In October of 1987 I was 16 years old. I was a minor participant in the economy but knew next to nothing about it. As far as the stock market crash? It didn’t even make its way onto my radar. I was looking for something to learn more about the crash in 1929 when I learned that the biggest stock market dive had actually occurred in 1987. Wait, what?
I started to ask around about people’s memories of the event. A member in my book group recounted how he had nervously, but presciently, pulled his money out of the market in the days leading up to the Black Monday. The last 10 percent was pulled out the day before. This was at the dawn of computer assisted trading and it was sometimes difficult to prove the timing of things, which he was forced to do in this case. The brokerage insisted that the order had not come in until after the price drop. Of course they did. He got his money at a better price than many other players. His regret? That he didn’t jump back in at the bottom. But that’s the crux isn’t it? You just can’t ever be totally sure.
My uncle recounted that his architecture firm was designing an office building for the group that ran the 10th largest mutual fund in the country. He had a 4:30 PM meeting with some of the executives on Black Monday. “Each one of them had hair that was mussed and wild, their shirts were rumpled and untucked, ties all askew. . .”
I expected him to say that one was drinking Pepto-Bismol straight from the bottle.
At the end of the meeting, one of the execs asked “What are we going to do tomorrow?” His colleagues all answered in unison: “Buy.”
The answer isn’t really that simple though. When two guys speculating on silver can almost break the banks and a dude trading options in Hong Kong can come within a stone’s throw of single-handedly wiping out Schwab, there are some big time problems. It seems to me that we get a little too cute with our money-making schemes. If you can’t understand what you’re being sold, it’s probably best to stay away from it.
Between these complicated financial products and raw human emotion we begin to get an idea of why markets aren’t truly efficient and why they need regulation.
But the regulators are part of the problem too. Why do we have so many regulatory bodies with unclear boundaries who prone to competition instead of cooperation with no single clear institution responsible for the big picture?
I also gained a better understanding of the bailout mentality from this book. It’s not really the too-big-to-fail institution we are trying to save, but all of the smaller ones caught in their orbit like planets circling a giant financial black hole.
Henriques’s book does a fantastic job of showing what happens when the giant herd-like investment firms smell smoke and all run for the exit at the same time. It’s a scary scenario. It happened in 1987. It happened again in 2008. And what did we learn? As Henriques poses the question: “Where does this leave us today, 30 years after Black Monday? Exactly where we were then: in a storm-tossed lifeboat in which all the passengers are shackled together with the obnoxious crew members who carelessly steered our ship into the storm” (p. 286).
In other words, we all need to be very careful because nothing has changed. . .
I started to ask around about people’s memories of the event. A member in my book group recounted how he had nervously, but presciently, pulled his money out of the market in the days leading up to the Black Monday. The last 10 percent was pulled out the day before. This was at the dawn of computer assisted trading and it was sometimes difficult to prove the timing of things, which he was forced to do in this case. The brokerage insisted that the order had not come in until after the price drop. Of course they did. He got his money at a better price than many other players. His regret? That he didn’t jump back in at the bottom. But that’s the crux isn’t it? You just can’t ever be totally sure.
My uncle recounted that his architecture firm was designing an office building for the group that ran the 10th largest mutual fund in the country. He had a 4:30 PM meeting with some of the executives on Black Monday. “Each one of them had hair that was mussed and wild, their shirts were rumpled and untucked, ties all askew. . .”
I expected him to say that one was drinking Pepto-Bismol straight from the bottle.
At the end of the meeting, one of the execs asked “What are we going to do tomorrow?” His colleagues all answered in unison: “Buy.”
The answer isn’t really that simple though. When two guys speculating on silver can almost break the banks and a dude trading options in Hong Kong can come within a stone’s throw of single-handedly wiping out Schwab, there are some big time problems. It seems to me that we get a little too cute with our money-making schemes. If you can’t understand what you’re being sold, it’s probably best to stay away from it.
Between these complicated financial products and raw human emotion we begin to get an idea of why markets aren’t truly efficient and why they need regulation.
But the regulators are part of the problem too. Why do we have so many regulatory bodies with unclear boundaries who prone to competition instead of cooperation with no single clear institution responsible for the big picture?
I also gained a better understanding of the bailout mentality from this book. It’s not really the too-big-to-fail institution we are trying to save, but all of the smaller ones caught in their orbit like planets circling a giant financial black hole.
Henriques’s book does a fantastic job of showing what happens when the giant herd-like investment firms smell smoke and all run for the exit at the same time. It’s a scary scenario. It happened in 1987. It happened again in 2008. And what did we learn? As Henriques poses the question: “Where does this leave us today, 30 years after Black Monday? Exactly where we were then: in a storm-tossed lifeboat in which all the passengers are shackled together with the obnoxious crew members who carelessly steered our ship into the storm” (p. 286).
In other words, we all need to be very careful because nothing has changed. . .
February 26, 2018
This is a fascinating, tough-minded account of the lead-up and aftermath of the worst meltdown in Wall Street history - October 19, 1987, when the Dow lost more than 500 points and 22.6 percent of its value. Author Diana Henriques does a good job of keeping the action moving while describing the cast of characters and their actions as the years, months, and days go past. There are many factors in this story, but two of the most pivotal are these: computer trading now drives the market, and trades (even thousands of trades) can be done in the blink of an eye; secondly, large investors such as pension funds, mutual funds, and hedge funds now control almost sixty percent of the trading volume on a typical day, so when their interests or strategies align, the market will often change in an instant on their preprogrammed orders. (In 1975, large pension funds collectively held $113 billion in stocks; in 1980 they held $220 billion; in 1985 they held almost $500 billion.) It's difficult to conceive, but nine or ten of these enormous holding companies can control the direction of the market on any given day. And when there are so many options available, from futures to options to swaps to derivatives, it's hard even for the brokers to understand what's going on. Here's from the book: "The flood of complicated new financial derivatives was so swift and full that Wall Street's primary lobbying group, the Securities Industry Association, had unsuccessfully appealed to regulators in June for a moratorium on new products, just to give Wall Street firms time to train their sales staff and adjust their paperwork procedures. And even if regulators grasped all the complexities and risks of these new derivatives - an arguable assumption in 1983, and for years to come - lawmakers in Congress were rapidly falling behind the financial innovation curve." Here's an example just to give you an idea of what's possible: arbitrageurs can now buy S&P 500 stock futures in the Chicago Merc's Commodity Futures Trading Commission pit. If the futures price is lower than the actual stock price on the NYSE, the arbitrage trader will buy the futures and dump the actual stock, often in huge numbers, causing a dramatic shift in the market; if the stock price is lower than the future index, he (or she) will buy the stock while dumping futures. Got that? The purpose is always to make a profit, even if it's just pennies on the dollar, and this book goes a long way in showing you how damaging that can be. Just for kicks, I looked at how many times banks themselves had caused financial difficulties, and here's the list: 1637, 1797, 1819, 1837, 1857, 1884, 1901, 1907, 1929, 1933, 1937, 1974, 1987, 1992, 2000, 2007. Think we'll ever learn?
October 14, 2017
An insightful and relatively accessible analysis of how the onset of automated trading and titanic investors changed the way that the world's investment infrastructure functions. I heard the author interviewed on the radio and was impressed by her incisive mind and detailed knowledge of the subject and its repercussions on history, fiscal policy, and how to manage market crises. Reading the book afterwards didn't disappoint -- Henriques lays out the competitive tension between the futures markets in Chicago and the stock exchange in New York, and how the rivalry between them turned into an interdependent system with inconsistent regulation policies. I was particularly interested by the deep dive into managing market crises... really, anyone who still thinks that the efficient market hypothesis has teeth ought to read that section twice. It's no wonder that the markets get described with unquantifiable terms like "mood" and "confidence"; we are not rational actors here.
As an engineer, it's kinda terrifying to see astonishing failures of error handling as standard operating practice -- even the cleverest strategists don't seem to fully consider "What if no one wants to sell when I want to buy? What if no one wants to buy when I want to sell? What if the clearinghouse's comms system is down? What if the market closes? What if everyone follows the strategy I'm proposing? Does that scale?" It was slightly reassuring to read the account of a Congressional hearing where many senior bankers said that no one really understood the market. Like quantum physics, I feel a little less stupid for not feeling like I have a grasp on it when nobody does. Useful knowledge, if depressing. "A First-Class Catastrophe" arms the reader with the perspective to have thoughtful opinions on fiscal policy.
As an engineer, it's kinda terrifying to see astonishing failures of error handling as standard operating practice -- even the cleverest strategists don't seem to fully consider "What if no one wants to sell when I want to buy? What if no one wants to buy when I want to sell? What if the clearinghouse's comms system is down? What if the market closes? What if everyone follows the strategy I'm proposing? Does that scale?" It was slightly reassuring to read the account of a Congressional hearing where many senior bankers said that no one really understood the market. Like quantum physics, I feel a little less stupid for not feeling like I have a grasp on it when nobody does. Useful knowledge, if depressing. "A First-Class Catastrophe" arms the reader with the perspective to have thoughtful opinions on fiscal policy.
December 24, 2017
Forty years ago the New York Stock Exchange experienced the largest one day drop in its history. Diana Henriques has written a history culminating in that event to illustrate the changes in the structure of high finance that took place at that time. Today we live in a world where the value of bets on future movement of financial prices far outweighs the actual value of the world's tangible assets and where the daily transactions in these bets is larger than the economy of most countries. But it was not always so. Henriques places the change in the 1980s when a number of new forces arose. She attributes it to the accumulation of enormous pools of money in organizations like pension funds and mutual funds. Since this money was necessary to the future well-being of its owners, the professional managers who handled it sought ways to ensure it against loss and the result was the invention of stock market futures as a way to lock in winnings. Since all this money had the same purpose it all started to move in lock step. Add to that the arrival of powerful computer systems and the stage was set for a massive self-sustaining panic triggered by any small event.
Henriques sees the 1980s as a series of increasingly powerful panics culminating in the collapse in 1987. In her conclusion, she argues that the underlying problems were not addressed at the time and that the situation has only worsened since. All the people who were rendered homeless in 2008 would likely agree.
It's a well written and engaging account, written for a non-specialist audience but it requires a bit of effort on the reader's part. My only quibble is that like much American history it has little room for any history outside of or prior to the US.
Henriques sees the 1980s as a series of increasingly powerful panics culminating in the collapse in 1987. In her conclusion, she argues that the underlying problems were not addressed at the time and that the situation has only worsened since. All the people who were rendered homeless in 2008 would likely agree.
It's a well written and engaging account, written for a non-specialist audience but it requires a bit of effort on the reader's part. My only quibble is that like much American history it has little room for any history outside of or prior to the US.
September 7, 2020
This book is an excellent look at the factors that led to the disastrous crash of October 19, 1987.
As Henriques shows, the crash is the product of various factors that manifested in the 80s such as the emergence of complex financial instruments that were barely regulated, the rise of technology that allowed for larger and quicker stock transactions (that could lead to large impacts on the market), complex stock market strategies, and the tangle of authority that prevented effective regulation of the new futures and options that emerged in this period.
What I found particularly effective was the way Henriques structured the book as a series of financial events that illustrated the various themes mentioned above. This allows her to contextualize the 1987 crash for the reader and show how no easy answer for the cause of the crash exists.
The book is understandable, and Henriques takes the time to break down the complex financial instruments (such as futures and options) that feature heavily in the narrative. However, a good financial background is handy.
Overall, this book is highly recommended for those who want to understand the roots of our modern financial system and how globalization and technology have created a larger, more interconnected market that we all live with.
As Henriques shows, the crash is the product of various factors that manifested in the 80s such as the emergence of complex financial instruments that were barely regulated, the rise of technology that allowed for larger and quicker stock transactions (that could lead to large impacts on the market), complex stock market strategies, and the tangle of authority that prevented effective regulation of the new futures and options that emerged in this period.
What I found particularly effective was the way Henriques structured the book as a series of financial events that illustrated the various themes mentioned above. This allows her to contextualize the 1987 crash for the reader and show how no easy answer for the cause of the crash exists.
The book is understandable, and Henriques takes the time to break down the complex financial instruments (such as futures and options) that feature heavily in the narrative. However, a good financial background is handy.
Overall, this book is highly recommended for those who want to understand the roots of our modern financial system and how globalization and technology have created a larger, more interconnected market that we all live with.
July 2, 2018
A great look at how close we came to "catastrophe" on Black Monday. I've felt that many of the too-big-to-fail banks are too-big-to-exist, but this book showed that even defaults at small, seemingly insignificant financial institutions can have wide-spread and devastating affects.
Here are the bits that interested me most:
1) The author argues for better regulation she also notes that the regulation that we have added doesn't protect us but rather could prevent banks from having the flexibility to react to the next catastrophe. For instance, if you can't take profits from your futures division to shore up losses in your options or equities division, the company can still fail.
2) Many of the problems that week stemmed from manual back office processes that took too long to complete and firms did not know how bad their positions were until shortly before the next trading day. Today much of this back office is automated (or should be), so knowing your position is typically not as scary.
Here are the bits that interested me most:
1) The author argues for better regulation she also notes that the regulation that we have added doesn't protect us but rather could prevent banks from having the flexibility to react to the next catastrophe. For instance, if you can't take profits from your futures division to shore up losses in your options or equities division, the company can still fail.
2) Many of the problems that week stemmed from manual back office processes that took too long to complete and firms did not know how bad their positions were until shortly before the next trading day. Today much of this back office is automated (or should be), so knowing your position is typically not as scary.
March 13, 2018
Riveting for someone who, like me, was in financial services in the 1980's. Henriques' anecdotes and thorough research build a compelling case for why 1987's crash is a lesson no one has learned...yet. The reception to this page-turner of a history book, however, is predictable. Those whose livelihood depends on the status quo, prefer to take the ostrich head in the sand approach. Wall Street does not want you or policy makers to read it. A review in the WSJ by a diehard efficient portfolio proponent claims Henriques did not prove her premise. No surprise there. Read this book if you are an investor who is curious to see how history may not rhyme but does repeat.
May 21, 2018
It’s great to read a book that reprises a significant portion of my career at a major bank. The recounting of the October 1987 market crash and the events that lead up to it by Diana Henriques is highly detailed- perhaps too detailed and the reason it didn’t get 5 stars- but it accomplishes it’s real purpose:To condemn the failure of the multiple regulators to get together and maintain currrency with fast moving technological and financial innovation. The fact that the problems continue today in the regulation of financial entities is a testament to the bureaucratic turf wars among regulators leading to duplicative burdens and excessive cost.
April 10, 2018
Total Star Wars ripoff! Since apparently the 1987 collapse was a prequel of the 2007-8 collapse. Despite that, and the fact that this suffers from Business Bookitis where a bespectacled and bookish-seeming man who would look more at home in an obscure corner of the library, but who actually possessed one of Wall Street's finest minds for the complex world of derivatives strides across a marble floor to a hushed wood-paneled boardroom where a gathering of central bankers awaits an explanation of just how bad the crisis is, it's very good, which is to say, very depressing.
June 12, 2018
This book thoroughly covers the cracks in the regulatory and operational infrastructure that were the root causes of the stock market crash of 1987 and its immediate aftermath. It's amazing to think that many of the issues such like regulatory arbitrage and newfangled innovations are as prevalent today as they were back then.
The subject was interesting, but the book read slightly unsophisticated. Maybe it was the author's intention to reach a wider audience, but it was a slight detraction nonetheless.
The subject was interesting, but the book read slightly unsophisticated. Maybe it was the author's intention to reach a wider audience, but it was a slight detraction nonetheless.
September 18, 2022
Learned a lot about the way various indices and markets are connected together. Took a bit to figure out how the various situations described in this book were meant to show how a disruption in one place could cause a big affect elsewhere. It seemed to be one incident would be described then another seemingly unrelated incident would follow. Eventually, it became clear that there was a common thread with all of these.
Although interesting, I found the book not quite a super good read. Not sure how to more accurately describe that part.
Although interesting, I found the book not quite a super good read. Not sure how to more accurately describe that part.
July 25, 2017
A first-class book on the flash crash of 1987, which didn't happen nor recover quite as quickly as everyone remembers. Extensively well-researched, the author takes pains to lay out the likely causes and impetuses for the big day without seeming to lay the blame unfairly on any given sector. I was pleased that she drew connections to both the modern day and more modern crashes (2008) without swamping the rest of the work. It's a little dry, sure, but given the subject matter I'd say it actually overachieves with regard to readability. An excellent retelling of this chapter of financial history.
February 26, 2021
Borderline 3/4. Heading for a 4 - a very good read especially if you remember those rough days of '87 - but it fell down at the very end by translating the story into modern relevance much too briefly. Not saying it doesn't make its point about how little we've learned, but, well, that lesson, a chief reason for this work, shows up only 2 pages before the last word. Just sort of surprised me... But still, a great recounting of what you knew, and and what you didn't know, of that era.
This entire review has been hidden because of spoilers.
November 6, 2017
Although, I did learn a lot, if you don't know much about the financial markets, this book is a little hard to follow. But don't be discouraged; it is very informative, if not extremely scary if you have investments in the markets.
April 25, 2019
Interesting as I have lived through the period being reviewed. But it gets pretty complicated with options and futures and commodities and stocks, etc. etc. Also must wonder if there are other thoughts/ideas/etc
June 14, 2018
An incredible look at the crash of the economy in the 80's. The author manages to relay all the important details while remaining interesting and weaving a solid narrative. I wish the narrative would have flowed better as a story.
November 2, 2017
Informative and entertaining, if a bit dry.
November 7, 2017
A very interesting book. I would recommend.
November 11, 2017
Fascinating story. Explained things well.
June 29, 2018
Detailed discussion on political,bureaucratic and academic background to 1987 crash. (Kindle).
January 18, 2019
Sobering account of this major event. Well researched and readable.
January 27, 2021
This is too dry for me to get into. No, thanks. Dnf'd in Ch. 2. I tried.
August 19, 2024
It is important to note that this is a journalistic book written through the regulator's perspective on Black Monday. Liquidity and inter-bank loans are also included here.
If you are looking for how investors dealt with Black Monday, this is not the place.
If you are looking for how investors dealt with Black Monday, this is not the place.
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