Where were you on BLACK MONDAY?
I’ve been asked this a few times over the years and since CNBC is doing a bulletin on it today here is my recollection.
Actually the problems started in the weeks prior to 19th October 1987. Many people had borrowed money on rolled over trading positions since the hectic summer where £millions were made (& lost). Many market strategists including the high profile strategist at Dean Witter Reynolds (now Morgan Stanley), John Mendelsohn had warned of the effects of ‘programme trading’ many times on US tv, etc. No-one listened.
Friday 16th October, however, provided a different slant on capital markets activity.
My father and I were with a small London brokerage at the time, Dunkley Marshall. There were around 40 brokers and dealers and another 30 support staff. On Friday morning the Great Storm hit the south eastern parts of England. I had left my house at around 7am for the 1 hour journey. The station was deserted like many. I scampered back to my house zig-zagging fallen trees and rang the office. A friend of mine, Richard Coles, a young dynamic broker (now living happily in Oz) surprisingly answered the phone. There were around half a dozen personnel in the office including my father who had walked from the Barbican. Coles told me it was like working in hell. It was impossible to answer the telephones around the dealing room with virtually no-one about so he had taken responsibility by operating the dealing room from the confines of the reception desk where normally young girls had transferred calls into the open plan area. By delegating price and dealing tasks to the floor and eslewhere he was just about handling the ‘incoming’ as the marines would say.
Monday morning was a whole new saga though. I had arrived at my desk around 7.45am despite difficult trains following the weekend when I had had to chop a few trees. Clients were phoning in at an alarming rate and the Mainwaring phrase “don’t panic” resounded around the office. I remember clearly one partner sitting opposite shouting at a client after receiving an earful of abuse and concern…”well, you think you’ve got ****ing problems, I’ve just bought a farm and had to contend with 500 fallen oak trees at the weekend, now stop wasting my time”. Or words to that effect! Anyway it wasn’t the first phone that got slammed that day.
The stock exchange electronic pricing system wasn’t ‘real time’ and throughout the day the only real picture the majority of us got were regular updates from our dealers. With the gyrations on FTSE100 of huge %’s (I think the day swing was around 40% although top to bottom around -23%) it didn’t take me long to work out that on a 20 minute screen delay the blue prices were probably red whilst within minutes the red were probably blue. A few trading clients took my advice at the time so I suggested a few buy trades at blue and did the same later in the morning. I can say with 100% conviction it was the only time that I’ve ever seen profits made at the high point as dealers were often shovelling trades at sometimes £’s lower. Of course, alot of discretion have to be allowed and not many tried this dangerous strategy. The best advice was to do nothing and mercifully many took that on board. I do remember though that an institutional client’s boss panicked at around 11am (my contact was in Bermuda on holiday) and sold millions of Attwoods through me at the wrong price; by the time my contact returned on wednesday Attwoods had rallied like most stocks.
By the time Wall Street had opened most in London had prepared themselves for a rocky afternoon. The lessons of the morning had stood us in good stead though.
Somehow we got through the day.
The next day was “Terrible Tuesday”. The firms credit control departments were on prozac and the Finance Partner and Settlements Manager tried to come to terms with the carnage. Stock delivery was a serious problem for every firm across the LSE ( and had been for weeks prior to the crash) but I don’t recollect any proper firms getting into too much undue stress.
Most investors had stood their ground and as we all now know October ’87 was really just a great correction rather than a descending crash like ’29 or what we went through more recently with Lehman’s.