October 19th – 30 Year Anniversary 1987 Crash

COMMENT: 30 years ago today I was sitting in a brokerage firm in New Castle Pennsylvania on a personal computer that had 720 K of RAM and ran at 1 GHz watching the market and sitting looking at the charting. Prices on stocks were running between 15 and 30 minutes late, nobody knew what was going on. All we knew was things were dropping, dropping, dropping and dropping, everyone was confused. It was crazy. The volume was bigger than they’d ever seen before. Therefore, they could not keep up with the bids and the ask.

I was short the market with every penny I owned and I had no idea how well I was doing. We tried calling places to get current prices if you could get through and even if you did they did not have current quotes, it was pure chaos. When the dust cleared at the end of the day the brokerage firm I was with had gone bankrupt and had lost most everybody’s money.

I had bought a ton of OEX puts and the person who owned the firm. Instead of processing them through regular channels, he decided to write against me on his own. He did not have the money to cover them. I was right on the market but wrong about who I placed my bids through. Three days later all the brokers at this firm were laid off, fired or let go… however you want to put it…. the friend who had the PC and the stock charts. I helped him move all the stuff out to his house. The next year he started his own brokerage firm.

The interesting thing is 5 to 10 days before that drop I told everybody we were in for a major crash but nobody wanted to believe me. But it was in the charts and I tried to show them this.

REPLY: Welcome to the old man in the corner club. You know. The old guy in the trading room who use to say this is just like 1929 when we were kids. Now we talk about 1987 which was 30 years ago. I was giving a WEC that weekend. We just elected a set of Double Weekly Bearish Reversals. The Arrays called for a low in 2 days. There were no other reversals between 286 and 180.

I remember standing up there trying to find some technical support between 286 and 180. I could not. There was nothing between the two even technically. The audience asked me what would happen? I said look, it sounds nuts, but we should move down 10,000 basis point in two days.

I myself could not believe it. But people paid me for what the computer had to say, not my opinion.

When that happened, it was right on the ECM date. It was absolutely perfect to the T.

Everyone was calling for the 1929 collapse. The model said new highs by 1989. That’s when brokerage houses were begging me to please come and speak to their retail audiences. I agreed and went to Toronto for Midland Daugherty. They filled the place with thousands of people.

Australian brokers and British brokers were all lining up to have me speak to their clients. It was all in their self-interest. They were paying back then $100k to get me to speak to their clients because I only did Institutional. It was an interesting time.

Comments

comments

Utopian

Leave a Reply

Your email address will not be published. Required fields are marked *