Today reminds me of 16 Oct 1987...it was a Friday

[neilgin1]

I was down on the CME floor, running a livestock hedge and spec desk....the entire week previous had been hell in equities, and on this Friday......near the close the Dow just CRATERED...down 106 points, which today doesn't sound like anything, but THEN...in 87?....holy cow.......EVERY SINGLE TRADER walked out that exchange on Friday, and we KNEW what Monday would bring.......but we NEVER imagined a 22% slam on Monday....I can you all this....regular open outcry trading sounds like a strong wind...that Monday, Black Monday, all day long the sound of the traders was like this hurricane ROAR...it was the sound of hundreds of guys panicking, it was the most freaked out, eerie sound I ever heard in my life.....here....wiki does a good job

http://en.wikipedia.org/wiki/Black_Monday_(1987)

anyway, I'm just screwing around today, (watching "Walking Dead") and I come downstairs just to see where the markets are......the Dow is down 131...okay, that's not the end of the world......its 11 AM eastern....but then I went to the DAX (german) and its down 245...2% and gaining selling strength into the close.....and I had this feeling I seen this before......if we flatten out....at 131 down at 11 AM....no problem, BUT if we build selling mo into the close.....and the DAX closes on its lows?

watch out, Monday could get nasty....I pray i'm wrong....the bad news this morning was a revised down on the GDP.....to -0.7

I got a bad feeling.....but as I conclude this post, both markets are flattening out, so maybe i'm just getting twiggy.

[Country]

I was not on the floor, but I was an investor that Friday trying to get out of as much equities as I could. 100 points was a nasty 5% down into the close and my wife and I knew it was going to be ugly on Monday. Now, 5% down into the close today would be a 900 point downdraft on the DJIA. We had a radio at work on Monday; listening to the 100 point clicks as the markets crashed. We were stunned. Now remember, the worst day was Tuesday. The bosses of the market considered closing because there were no buyers and this thing might completely collapse in the morning. Maybe you have some insight Neil on Tuesday's proceedings.

[68Camaro]

I sold out the week before the crash - the timing was mostly luck, but the reason was based on feeling that the market was in a bubble. I sold out again in 1999 for same reason - it turned out to be 2 years too early but the reason was sound - I missed the peak of the uptick but I slept at night. I got lucky again in 2007, sold out at the market peak in Oct. I sold out again in 2010 when I decided the market couldn't be trusted - have since stayed out - if you can't trust it, why would you be in it?

Be interesting to see what happens Monday.

[silverstacker]

Very interesting reading all 3 of your stories of that event. I Didn't experience it myself being 12 years of age but I do remember that my next door neighbors father being arrested after that for insider trading. I lost but recovered and then some from the 2008 collapse and am prepared for whatever happens on Monday. Due in part to people like yourselves that can provide insight and thoughts about current world events and your own take on the markets. Thanks

[neilgin1]

I was not on the floor, but I was an investor that Friday trying to get out of as much equities as I could. 100 points was a nasty 5% down into the close and my wife and I knew it was going to be ugly on Monday. Now, 5% down into the close today would be a 900 point downdraft on the DJIA. We had a radio at work on Monday; listening to the 100 point clicks as the markets crashed. We were stunned. Now remember, the worst day was Tuesday. The bosses of the market considered closing because there were no buyers and this thing might completely collapse in the morning. Maybe you have some insight Neil on Tuesday's proceedings.

of course I can share, and its my pleasure......after Mondays trade and close, it FELT ...like somebody had raped your sister....no joke....in fact, I cant remember now if I even went home that night, because "out trades", which is the reconciliation of commodity trades that didn't match up, from the day before, was emergency scheduled for 4 or 5 AM.

Now, we were a livestock hedging firm, MOSTLY, which meant that we had millions of pounds of pork...in cold storage, all the primal cuts, hams, bellies, butts, and used futures to either lock in, or carry them another month in cold storage, etc. I also had about five veteran traders who not only traded cash pork, but all had a group of speculators, this was back in the days when an off floor trader COULD charge $65 a car commission, and these guys were trading tens and twenties...their accounts were for friends, doctors, lawyers, etc......(member that thing with Hilary trading thru Refco and Red Bone?...where she "turned" $1,000 into $100,000?....now I am NOT a big fan of hers, but there wasn't really anything nefarious going on, because I KNOW what was going on, because my five guys were doing it.....lets say Trader A, who had known me since I started at 22, I was 27 in 87....he was also a friend, he might have ten accounts, not one of these accounts had more than 3k in it, but Trader A was a balls to the wall pork belly scalper....meaning he would be throwing around 10 and 20 car lots at the market, buy and sell, 95% of the time making a profit anywhere from 60 to 160 points...but during the heat of the trading day, we didn't have time to allocate what were his cars, and what were his five accounts cars, so my red jacket pockets would be stuffed with offset orders worth tens of thousands of dollars....THEN when the market closed, we'd spend 10 minutes matching buys with sells...it was allocation, and technically it was a gray area, BUT I can tell you my guy was on square, everybody got even steven splits......a 10 car profitable buy and sell was split up 2 cars apiece, and on a 100 point, that was $780 dollars minus my guys $130 commission.......I know it sounds like a lot ...a 130 bucks, but losers?...would go into Trader A's account....so Red Bone was doing the same for the "Guv's" wife over at Refco...it used to make the guy that owned the clearing house crazy, when we did this, but what did he expect?....I had phones in both ears, i'm running into the pit, it's like I didn't have the time to write out 5 full account numbers on two orders, and sometimes I had fifty...or a hundred matched up buys and sells in my pocket at the 1 PM close)

now I said all that to say this....RARELY, did any of my guys go off the reservation, ie...trade SnP 500's....I was the only one spreading corn and wheat, as well as bellies against hogs...but that week, one of my guys, had this goof decide to trade one lousy car of SnP 500 OPTIONS!!....which is why I had to crash on the office couch that Black Monday night...which kind of pissed me, coz my son's mother and I had been living together for two years now, and i'd rather go home from that miserable day to her nice arms.....I was always intensely SOBER on the trading floor (there was a LOT of lil coked up traders and clerks in those days.....frick, after I left my desk in the hands of guys I trained, all friends, trained the "neil way", which meant the desk was run like the bridge of a destroyer....one of my buddies later told me, that him and other degenerates, were not only snorting the stuff off the desk, but dealing it on the floor...when he told me this in 93, I laughed and said, "you KNOW I would have shut that down in 2 seconds"...he laughed and said, "why do you think we waited till you left?...sorry to digress, but I cant even imagine that....lining up rails of cocaine to snort off a trading desk....there were no cameras in those days, but still....gee whiz) but that night, just to get to sleep, and mess with the owner of the house, I blew a joint.

Tuesday morning....here we go.....first thing, that dopey SnP option clears, so no worries...but we're getting ready for the of the world.......because every single OTHER commodity on Monday was limit DOWN.....SnP opens with an ROAR eclipsing the day before's roar....it was just terrible, because the NORMAL tick in the 500's was .05...ie, 785.95, then 785.90...well, on that morning it was trading in increments of 5.00 to 10.00........from $25 a tick to $5,000 a tick.....I forgot to tell ya, the afternoon before, there was a line of guys 75 deep, all lined up outside the membership office, dumping their seats at insane firesale prices.

I was so cautious before I walked by that pit, I would take my full gold membership tag with my moniker and house, and flip it over, so you couldn't see it, because I thought guys MIGHT be so desperate, they would actually "put" cars of SnP's into me....meaning they would put that "neil" bot 10 cars at such and such a price.....so 11 AM comes, and the noise steadily drops until NOON....then the floor got silent...it was weird, you could hear a shout , here and there...otherwise deathly silent....I was thinking "ohhhh, no"....and I was smoking a butt near the quotrons, quote machines....watching crude oil trade, and for some reason, I was watching the CBOT's stock index , the "Major Market Index" the MMI, an index of 20 stocks, and like everything else, it wasn't even moving....BUT, then all of a sudden, out of nowhere, it ticks UP....and then again...just two ticks, like somebody bot a tiny 20 lot....and the trading floor EXPLODES to the upside...it was the wildest and craziest thing I ever seen or heard in my life...I mean..."the world was ending, right?"...you got to have bolls of steel to bid in the SILENCE.

and that was the LOW....we traded OUT of it, it was weird and scary, guys got killed, but we traded OUT of it....no commie $700 billion dollar "tarp" plan, that bailed out the very guys who caused the 2008 crash...and that was under Bush's watch....and now under Obama, QE infinity, you got bank prop desks AND the FED in every single market!!!!

it makes me sick....these aint free markets....this is socialism....worse "crony capitalism"....oligarchy, both dems and repub's....just a house of whores. there are many wheat and corn spreads I would LOVE to trade today, but I wouldn't go any near the "markets"....coz THEY ARENT FREE MARKETS!!!....just a bunch of filthy commies, they all make me LITERALLY sick to my stomach.....sorry to rant, but....seems like we've become a nation of lies.

btw......I'm not sure about Monday, when I posted the dow was down 135, when it closed it was down 118...Like Country said, a REAL Friday sell off would be like 900 points, which was what I thought we'd see on Fridays close....so maybe Monday will be just another dreary phony market....the only markets now I care about are physical Ag and firewood.....I care about corn beans and wheat (the three classes, HRW, SRW, and HRS) but wont trade them. best to you all, n

[deacon]

Thanks you for telling us about the 87 crash. I was wondering what those are like and I'm glad you took the time to share it.

As an outsider who doesn't trade on margin I would welcome a flash crash. For long term investors, it would allow them to get more for their money.

[Recyclersteve]

My memories of the Crash of '87-

I was having lunch with a business associate at a very nice restaurant in downtown St. Louis on Monday the 19th and the waiter came over and said the Dow was down about 100 points. I immediately thought to myself "He doesn't know what he's talking about." Well that was just for starters and the Dow finished the day down over 500 points.

I can't remember if I saw this program live, but Louis Rukeyser's popular PBS program Wall Street Week with Louis Rukeyser had a bold prediction from Martin Zweig on Friday the 16th that the market was ready for an imminent sharp crash.

Cue forward to the part from 6:30 til about 8:35 on the following link:

[youtube]https://www.youtube.com/watch?v=2MyToTwag34[/youtube]

Both Rukeyser and Zweig have passed away, but watching this video gives me a bit of the shivers.

I have no predictions whatsoever about next week, but enjoyed reading about this crash that I remember pretty vividly. Fortunately, I had nothing in the stock market at the time.

[68Camaro]

Interesting clip. In that moment there is a sense in which all three commentators were right as it was a bubble that needed to pop and the market did crash but the economy was still fundamentally sound so the equity recovery was very quick. And the one that was most correct was zweig both about the crash, the traps, and the continuation of a long term bull.

[Country]

My wife and I watched the show every Friday. This show we watched it live. The feeling you had was ominous. It was a gruesome feeling watching it live; no one knew whether the financial system was going to collapse - a worldwide event that started in Asia first with the Hang Sang and Japan.

[neilgin1]

My wife and I watched the show every Friday. This show we watched it live. The feeling you had was ominous. It was a gruesome feeling watching it live; no one knew whether the financial system was going to collapse - a worldwide event that started in Asia first with the Hang Sang and Japan.

I hear ya, it WAS a very scary time, BUT we traded out of it!...we didn't do the 2008 $700 bln dollar "Tarp"....all the guys I trained up in the 80's, we still talk frequently, and in late 2008, the Lehman moment with Paulson ramming thru the "Tarp", we were all so crazy furious...because YOU LET THE MARKET TRADE!!!....if you're on the wrong side, or over exposed, OR engaging in dubious trade practices?....guess what?...you take the hit, that's whats called a FREE MARKET...if you get killed?...hey, that's called "Moral Hazard"......i'm gonna write more on what I saw, my evolution in life, the things I've seen, but I want you guys to watch this Frontline, called "The Warning".

Commodity markets are REGULATED by the CFTC....I had great respect for the CFTC, because I NEVER took a dime off that trading floor, I didn't trade for ON THE SQUARE....guys around me were breaking regulations, stealing hand over fist,and it sickened me, they had NO code of honor, a man MUST have a code of honor, and its not because i'm a goody two shoe, but if you destroy the Free Markets, all it does is give ammo, to commies and socialists who say, "LOOK! capitalism doesn't work!"

in 1996, a very good leader Brookesley Born was nominated to head the CFTC, and she discovered something that scared her, a dark market, that eventually lead to the crash of 2008, and the mess we are in today.....so she sounded the alarm, and look what happened to her...watch this Frontline.

http://www.pbs.org/wgbh/pages/frontline/warning/view/

our leadership in all avenues of this American Life have failed us....they are criminals.....and now they want to drag us into WW3. I got more to write later....this Frontline wont bore you, it might infuriate you though.

[silverstacker]

Interesting clip. In that moment there is a sense in which all three commentators were right as it was a bubble that needed to pop and the market did crash but the economy was still fundamentally sound so the equity recovery was very quick. And the one that was most correct was zweig both about the crash, the traps, and the continuation of a long term bull.

Funny you mentioned the "traps" section of that video. The third trap was the one no one saw coming. Had to watch the rest and then finally this one

https://m.youtube.com/watch?v=5PUwr8DsYeg

Scary

[neilgin1]

Interesting clip. In that moment there is a sense in which all three commentators were right as it was a bubble that needed to pop and the market did crash but the economy was still fundamentally sound so the equity recovery was very quick. And the one that was most correct was zweig both about the crash, the traps, and the continuation of a long term bull.

Funny you mentioned the "traps" section of that video. The third trap was the one no one saw coming. Had to watch the rest and then finally this one

https://m.youtube.com/watch?v=5PUwr8DsYeg

Scary

wow, that was a blast from the past, and off topic, when they went to Chicago, I saw a few guys I knew, especially at the 5:49-5:55 mark where you see this sandy haired trader running thru the pit to buy or sell, I knew his name, didn't know him, but his then greek girlfriend, beautiful woman, she I knew,didnt "know" her like that...then, but she was friends with my sister, who worked on the floor for just a couple months, so.......we made friends....(nothing more, coz I have three strict "man rules", never mess with another guys wife or girlfriend, never mess with a guys wallet, and never mess with a guys intoxicants) anyway this guy was about 10 years older than me, he was in his mid thirties.....and she was his kept woman...the guy was a Wildman, traded THOUSANDS of cars a day....she thought he was going to marry her, poor girl....then in the early 90's, out on the west coast, during one of my son's mother and my habitual "separations"...she became more than a "friend"....and I did love her, but she had a character flaw that precluded a deeper relationship, she was truth challenged.....and always little lies I would catch her in, but wouldn't say anything, plus I was still married, with NO intent on divorcing THE woman I KNEW I wanted a child with.

this greek girl came from money herself, and one night she begged me to impregnate her, because her elderly aunt and uncle, who were fond of me, "would give us a house and money" if I got her pregnant......of course, I didn't, and that was the last night we were together. I don't react well to crazy stuff like that. she found a rich guy later, but turned out he had hep C.....the fatal kind, she married him, we had one last lunch, pre-9/11...and then we lost contact. I read a couple years ago, she died in 2005, I would assume hep c,contracted from her rich guy husband.

sorry to go SO off topic, but seeing that trader skittering across the pit on Black Monday 87, brought back a ton of personal memories. the greek girl was a dear friend, she was fricking beautiful and I DID love her, and she died early, which makes me sad, coz I wish she could of found what she was looking for.

on topic?....when the whole global financial edifice DOES finally implode?....and it will, my prayer is that all of us, and those we love, do not know hunger nor hardship.....coz this next crash?...will be hell.

[silverflake]

Neil. still waiting for you to write a book a bout your life. Count me in as a first buyer!

Black Monday '87 I was a freshman in college in Boston. Yeah, sure the crash was big talk but all of us 18 year olds didn't really take notice because we didn't have a dog in the fight. It didn't affect us until.....Tuesday morning, 8am Statistics class. I won't print my professors name but he came into class looking like he needed to be on life support. White as a ghost, looked like he hadn't eaten in 48 hours. This guy was a prototype college professor-nerd type. Patch elbowed tweed sport coat, spectacles, whiney. He comes in puts his brief case down and looks at all the future pharmacists in the class and in a nasally almost pathetic voice says: "Anybody else lose their shirt yesterday?" Then proceeds to teach us. Poor guy was miserable.

That's it. My parents were blue collar. Their investments consisted of CD's (not bad back then). So that's all I have for you. Yes, be prepared for the next one. Feds toolbox is empty.

[neilgin1]

Neil. still waiting for you to write a book a bout your life. Count me in as a first buyer!

Black Monday '87 I was a freshman in college in Boston. Yeah, sure the crash was big talk but all of us 18 year olds didn't really take notice because we didn't have a dog in the fight. It didn't affect us until.....Tuesday morning, 8am Statistics class. I won't print my professors name but he came into class looking like he needed to be on life support. White as a ghost, looked like he hadn't eaten in 48 hours. This guy was a prototype college professor-nerd type. Patch elbowed tweed sport coat, spectacles, whiney. He comes in puts his brief case down and looks at all the future pharmacists in the class and in a nasally almost pathetic voice says: "Anybody else lose their shirt yesterday?" Then proceeds to teach us. Poor guy was miserable.

That's it. My parents were blue collar. Their investments consisted of CD's (not bad back then). So that's all I have for you. Yes, be prepared for the next one. Feds toolbox is empty.

Flake, ....thanks for the sentiment..(lolz) I dunno, it'd be pretty boring imo, I really just been a white boy squirrel trying to get a nut in this life.

Boston, huh?....oh man, I haven't been to Fenway yet! I REALLY want to take me and my son to Fenway for a pair of games, I love the Red Sox, White Sox, too. Dodgers, heck I just LOVE baseball. (i'll pin up a trailer for a really neat doc they got on Netflix, off topic)

your poor professor, and I mean that. Guys like him, they're smart, they earn a nice living, and they just get into stuff, they shouldn't be....meaning being a speculator, whether of stock or commodities......and that vocation is FULL TIME, and it really takes everything out of you, the tension, daily, is unbelievable.

you mentioned the old CD, used to be a good deal, same with triple A rated muni bonds, interest tax free....and stocks, lets say blue chip American companies...say like Johnson and Johnson, which kick off solid dividends, I call those "cop and locks", meaning you hold them...back in 87, at the depth of the crash, if you had bot JnJ as a cop and lock?....and held it?...man, you'd be solid.

but as you said you were 18 then. Today brother, and this is just my opinion, there are only two good places to park money, one is LAND with both wood and water...land say in Iowa?....farmable land?...we still have to wring some excesses out of, its a little bubbly, and the way the growing season is setting up, we're looking at another record or near record corn crop, maybe put the price below $3 a bushel, we'll do a another near record bean harvest, but global demand is real good, and wheat, especially global wheat, the harvest here is going good for winter wheat, and the price is lowish. Point being, farmland should trade lower, but land with timber on it, and water beneath?....that's the long term trade...and the other is...why we're here...PM's....and base metals....as I said before I am VERY fond of the $100 FV box of nickels....forty rolls of what would be a METAL $2 bill's as a way of saving MONEY onsite, along with a robust PM accumulation...I buy Ag, coz i'm decidedly "middle class"...and cant really afford Au...if I had JUST 10k extra, i'd want to buy a 50 count roll of tenth toz gold eagles....I have the "credit", but to spend that ON credit doesn't seem to be prudent...to me.

Today's equity close, was a real desultory affair, seemed to just sink near the close. I don't know if the coming storm will happen during the summer...crashes always seem to happen when fall and the impending winter draws near, as winter is like a "death" of sorts.

so....Pharmacy school, huh?......hmmm, interesting. lol......you have a great rest of the day Flake, n

oh, here's the trailer for "Knuckleball" on Netflix....five stars, if you're a baseball fan, and a fan of Tim Wakefield, who was one of my favorite players...class act.

[silverstacker]

Neil, did you know a commodities exchanger in bellies at the CBOT named kreigermeyer? Just asking because he lived next door from us and was one of the many that was arrested for insider trading. Thought I would ask if you knew the name or the person.

[silverflake]

Neil,

Am actively saving my pennies for some land. I live in the Blueridge mountains and have been fortunate to make friends with people who have nice pieces of land ranging from 20 acres to 500 acres. Love it.

Have been accumulating PM's actively since 1991 but always pulled silver out of my paper route money as a kid, My Grandfather was a bus driver in Boston. Had a big old stash of silver coinage culled from the commuters of Beantown. He always told me "if it's silver, it's real. Keep it." So I did.

like the rest of us 'middle class', I am trying to teach my kids what I have learned. Avoid debt is my biggest preaching to them. My mortgage will be paid off in 3 years (as long as a semblance of "the system" remains in place). Have turned my quarter acre city plot of land into a nice fruit and veggie producing haven.

The next Black Monday is coming. I can feel it. Perhaps this fall with the Shemitah....we'll see. We all need to do just whatever we can. But be prepared. Don't hide your heads in the sand.

AND NEIL.....I could see Fenway from my dorm room. We would lift the windows in the spring and have the game on the radio. Could hear the delayed crowd reaction to whatever was happening. Fun times. Get to Fenway.