Wow, has it really been 20 years? I had been with Raymond James for six months when the roof caved in October 19 ,1987. The market slashed approximately 25% of the value of stock owners wealth in one day!
Today the market would have to decline 3,500 points to approximate 1987's carnage. Although, given the superstitious nature of market mavens and some of the recent headline bad news that comes along with a Presidential campaign, the market today appears to be off to a pretty good start to replicating some of the damage. JK, it's just another normal crappy day.
Interesting to look back and see how far an institution like the market has come in 20 years. We're told that with the circuit breakers that are in place, a crash like 1987 couldn't happen again. That always leads me to think that while it may not be "exactly" like the crash of the past, there is no reason to think that something "similar" could happen with somewhat more or less magnitude, given that we are dealing with human beings, who are driven by the same primal emotions of fear and greed that have driven these types of markets for as long as they've been around.
It's a game, like baseball or golf, that it seems like even those who do well in it are at times humbled by occasions like this, true "black swan" events that cause you to pause and wonder if you really know anything about the game. We've all heard of Hall of Fame players, when interviewed about the thoughts they go through when they're in a slump, say they wonder if they'll ever get a hit again. And that's the superstars!!
Sometimes you become a victim of your own analysis, or over-analysis. It becomes tough to decide what to do. During events like this you almost have to have the mind-set like the first responders during 9/11, rushing in while everyone is heading for the exits. And that is a tough mind-set to have.
In just the short time I've been managing my own retirement account, the worst mistakes I've made were selling good companies too soon even after they made me considerable amounts, but continued on after I sold them. Companies like PetroChina, CNOOC, Google, Penn National Gaming, Posco and Google were allowed to leave the fold and showed their displeasure by continuing to rise. More recently I lost LuluLemon right before they announce earnings and skyrocketed. Years ago I sold Sears right before Eddie Lambert stepped in and took control. But you have to look at where mistakes were made in order to avoid them in the future, regardless of how painful the introspection may be.
We'll see how this one goes, but if history serves as a guide, shortly after the 1987 Crash, the market recovered, returned to pre-crash levels in short order and catapulted to historically high levels and beyond throughout the 90's. Hopefully history repeats in this regard as well.
HAPPY ANNIVERSARY CRASH OF '87!!!
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