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The Oral History : Black Monday Twenty years ago this month, the earth stood still as word spread of the Dow’s plummet — the worst securities-market panic in half a century. A rollicking “decade of greed” came crashing to an inglorious last call. Tapping the traders and market players who were closest to the action, sifting through myth and hype, we’ve detailed one of the darkest days in history — in the words of those who lived it.
By:
Scott Eden ,
Teri Buhl
October 2007 , Page 66
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//As the autumn of 1987 crept closer to winter, the red-hot financial world held a firm grip on the American public — and not just their wallets. Tom Wolfe’s
The Bonfire of the Vanities was being serialised in
Rolling Stone. Oliver Stone’s
Wall Street was in post-production. The relentlessly gluttonous bull market was a full five years old, making it, at the time, the second-longest equities run of the century, after that of the Roaring Twenties.
That August, the Dow reached 2722.42, an all-time high, having peaked 48 percent over the previous 10 months. Testarossas were streaming out of Ferrari dealerships. The boom in M&A, takeovers and leveraged buyouts — Wall Street was deal-crazy, and therefore debt-crazy — was sonic, and the stocks of potential corporate targets were being priced at what was then termed their “private market value.” Maths and computer wizards had pioneered sophisticated programme trading — index arbitrage and portfolio insurance chief among them. The aggregate P/E ratio for S&P 500 stocks was a gaudy 22.7. George Soros, in a Fortune article published that September, explained: “Just because the market is overvalued does not mean it is not sustainable.”
Soros could not have been more wrong. On October 19, 1987, stocks went into freefall. The Dow opened that day at 2246.74. It closed at 1738.74. The marketplace, so sure, so well-engineered, had come apart in a most spectacular self-made disaster. Systems failed. People panicked. Now, 20 years later, the question of what exactly caused the crash forever known as “Black Monday” is still debated, generating endless controversy, blame and ill will.
Much of the post-crash analysis focused on overvaluation. Not long after, John Kenneth Galbraith described the preceding bull market as “pure speculation,” the result of “an absolute commitment to the idea that the market will go up forever.” But the trend since the crash indicates, perhaps, that stocks might not have been terribly overpriced after all — at least not enough to explain the magnitude of the sell-off. By 1989, the market had recovered all of its lost value, setting the stage for the longest bull run in U.S. history. As many have pointed out, it’s possible to view the crash as an anomaly, albeit a dramatic one, in an otherwise ascendant two-decade trajectory that started in 1982.
Nevertheless, blame for Black Monday was laid squarely at the feet of that relic of risk management, portfolio insurance. The 304-page Brady Report, the result of a Congressional investigation into the crash, took a particularly dim view of portfolio insurance, one of the earliest dynamic hedging strategies, which attempted to protect money managers from losses by taking hedge positions in index-futures contracts. Hayne Leland, one of the inventors of portfolio insurance, puts it simply: “If the market goes down, you sell out in a very systematic way.” With these strategies locked in, selling begat more selling — a chain reaction — and when investors saw such sharp declines they assumed the worst, leading to panic unseen since 1929.
Others have blamed the New York Stock Exchange’s specialist system, which nearly went belly-up when it couldn’t handle the volume of sell orders flooding in. Inventories swelled, and many specialists lacked the capital to cover it all, fuelling a vicious liquidity crisis. At various points, there were precisely zero buyers. In the final analysis, however, most observers agree that
both of these supposed triggers — dynamic hedging and overtaxed specialists — were contributors.
One important thing to remember: Most people saw this coming. By September 1987, money managers had become nervous. Trading in stocks was volatile, and the major indices had come off their August highs, making headlines. The Wednesday before the crash, stocks sold off 5 percent. In the last hour of trading on Friday, October 16, the Dow had plummeted 108 points, completing a 9.5 percent decline for the week. Unusual, ominous developments were occurring all over the world, both within the financial industry and without. Congress had produced fresh legislation to eliminate tax breaks related to financing mergers and acquisitions. A currency dispute smouldered within the then-G6, and Treasury secretary James Baker suggested publicly that the dollar might devalue. Reports emerged of U.S. airstrikes against Iranian oil platforms in the Persian Gulf.
On Friday, October 16, the Great Storm of 1987 — a windstorm with hurricane-strength gusts — pummelled the South of England. Many traders were unable to get to work. Meanwhile, in Chicago, futures were already being sold heavily, creating a gap between the index value in the derivatives markets and the value of stocks in New York, which spilled over to Monday’s trading. As investors in the U.S. awoke that morning, they learned that bourses from Asia to Europe had taken brutal beatings: London’s FTSE fell 10.8 percent, while Hong Kong’s Hang Seng Index lost 6 percent. (Hang Seng officials decided to shut the exchange; it wouldn’t resume trading for another week.) With all this in mind and the markets set to open, everyone sensed it was going to be a bad day. Just how bad, no one knew.
7:00 A.M., MONDAY, OCTOBER 19, 1987
ART CASHIN, HEAD OF PAINEWEBBER'S NYSE FLOOR OPERATION: When we came in, the market already looked like it would be down 5 percent, which was a horrendous number. I remember someone in the Luncheon Club was going past the breakfast tables, and he turned to someone else and quoted from the ancient Roman gladiators. He said, “We who are about to die salute you.” That’s how much people thought that it was going to be a bloody Monday. The scale of it, however, was never, ever dreamed of.
7:30 A.M.
LEO MELAMED, CHAIRMAN OF THE CHICAGO MERCANTILE EXCHANGE'S EXECUTIVE COMMITTEE: The price [of S&P 500 futures contracts] at the opening was horrible. It was down some enormous amount — 2,000 points or something like that.
Earlier, when I had started to head to the exchange, long before the market opened, I got a call from [NYSE chairman] John Phelan, who said to me, “We’re going to face a difficult day today, Leo.” He said we should stay in touch during the course of the day. It was the scariest day of my life.
9:00 A.M.
RICK KETCHUM, DIRECTOR OF THE SECURITIES AND EXCHANGE COMMISSION’S DIVISION OF MARKET REGULATION: I was scheduled to moderate a panel in New York that morning. My staff had been talking to the New York Stock Exchange and the major firms that handle institutional orders to understand exactly what the flow looked like going into the opening that day.
I opened my panel about a quarter to 9 and went to talk to one of the senior members of my staff, who confirmed that not only did it look bad, but far more horrible than any of us imagined — from the standpoint of unconstrained institutional selling.
I excused myself from the panel and headed up to the NYSE. It seemed like the right place to be to make sure I had an understanding of what was happening. I met with Bob Birnbaum, who was then the [exchange’s] president, and he confirmed that specialists had very large positions from the selling on Friday — so the additional selling was placing them at significant risk.
We went down to the floor to see Don Stone. Don was viewed as the primary practitioner/specialist spokesman for the exchange throughout the ’70s and ’80s. This was probably a little before 10. Trading activity was extremely tumultuous. A large number of stocks had not yet opened because of the huge imbalances. I remember what Don said to me that particularly struck home: “My guys were heroes on Friday; they took large positions. But there’s no way we can sustain this with what’s happening today — and I don’t see where the bottom might be.”
9:30 A.M.
KENNY POLCARI, NYSE FLOOR TRADER FOR WILLIAM LATHAM & CO.: I traded in the main room, and my clients were the institutional brokers: Goldman, the Morgans and Salomon. I traded blue-chips like Coke, Colgate-Palmolive and Johnson & Johnson. I still had the prior day’s settlement work to follow up on.
I was nervous. Friday’s Dow had dropped 108 points. The Wall Street Journal had been writing about the worries of portfolio insurance.
At 9:20, the premarket orders were coming in heavy. Each lot they were asking to sell 50,000, 100,000, even 200,000 shares. Those were large orders for that time; I was receiving only red sale tickets.
DAVID MIRANDA, NYSE SPECIALIST FLOOR CLERK: Before the bell, there were such huge sell imbalances that stocks weren’t opening. But I remember this specialist for U.S. Steel, which was still a bellwether at that time. He said, “U.S. Steel is opening at the bell.” So it’s 9:30, and of course he opens it too high — and the thing tanks. His firm went out of business.
10:00 A.M.
HAYNE LELAND, INVESTOR OF PORTFOLIO INSURANCE AND PRINCIPAL OF LELAND O'BRIEN RUBINSTEIN ASSOCIATES: Everybody was pretty nervous that Monday was likely to be a bad day. Therefore, Mark [Rubinstein, another LOR principal, who like Leland was a professor at Berkeley] and I were taking the 7 o’clock flight from Oakland to Los Angeles so we could be in the office.
We were selling S&P index futures, following the discipline of our programmes. As we moved into October, in fact, the market had started having pretty big one-day swings and drops, with a general tendency downward, and we had raised the hedge of the average programme up to 25 percent from an average of maybe 10 percent. We and our subscribers were about half the market in portfolio insurance at the time. We had about $50 billion in underlying assets being protected.
Our departure time was after the opening of the New York Stock Exchange. As I took the taxi to the flight, I was just getting the opening. I remember hearing that in the first five or 10 minutes of trading, the market was down 60 points. My first reaction as I boarded the plane was, “Well, 60 points is bad, but it’s not really a disaster.”
JIM ROGERS, INVESTOR, SHORT-SELLER AND CO-FOUNDER, WITH GEORGE SOROS, OF THE QUANTUM FUND: October 19, 1987, was the best birthday I ever had. I covered all my shorts that day except one. I was short a lot of financial stocks — they were investment banks, nearly all of them. I wish I remembered better; I’ve been short a lot of things since, and I’ve been long a lot of things since.
I had been short since earlier in the spring. I was up on my roof exercising on a stationary bike as the market opened. Because I was up there, I didn’t know what was going on. When I finished exercising, I called the broker to see what was happening. He told me, “Oh, my God — the market’s down 150 points!” He said it was collapsing. So I started putting in orders way below the market to cover, not expecting to get hit — but if I did, you know, hallelujah.
11:00 A.M.
DAVID RUDER, CHAIRMAN OF THE SEC: I gave a speech that morning sponsored by the American Stock Exchange. [Ruder delivered this address in a ballroom at the Mayflower Hotel in Washington, D.C., and what happened next has been referred to by some as “the $3 billion typo.”] I believe it was on international securities regulation. During the speech, which closed at about 11 a.m., there was considerable activity in the back of the room. It was only afterward that I was told that the market had declined some 200 points.
I came out of the speech to a bevy of reporters. One of them said to me, “What are you going to do?”
I said, “I don’t know. I’m going to go back to the office and find out what’s going on.”
Then the reporter said, “Well, what
could you do?”
I said, among other things, that if the circumstances warranted, it would be possible for the Commission to close the markets for a short time in order to let them consider what’s going on and regroup. That remark was interpreted by the reporter as something like, “SEC chairman says markets should close” or “ . . . will close,” I forget which. That was not a very happy event for me.
Click here for audio clip. I went back to the office, and the press secretary told me that had gone out over the wire. We immediately put out a statement negating that statement, saying it wasn’t true. There was a lot of press heat from that. One of the
Washington Post reporters the next day suggested that the market had gone down 200 points when that statement was first on the wire, and then another 200 points when I later refuted the statement — suggesting somehow that I was responsible for 400 points of the 508 the market lost. I was not very happy with that, as you can imagine.
BLAIR HULL, OPTIONS MARKET MAKER, CBOT: I said volatility-options prices were going to the moon. I was thinking,
How do I get out of the way of these orders?
ART CASHIN: It was on the Dow headlines that the SEC might consider a trading halt. Well, that led everybody to believe two things: One, that even the SEC was getting panicky. But more importantly, if you’re trying to stand pat and not panic, and they’re going to have a trading halt, you’ll never be able to get out if you’re long — so get out now. That really helped to accelerate things.
12:00 P.M.
MARIO GABELLI, FOUNDER AND PRESIDENT OF GABELLI FUNDS: I was in my office on Third Avenue, and I remember all the lights on the boards. Most firms had direct lines to the trading desks. And it was like Christmas. All the lights — it was absolutely terrific. It was wonderful to be on the desk that day. That’s what value investors love: blood in the streets.
We understood that there were a lot of institutions that had bought into the notion that they should protect their portfolios by buying insurance. And Leland O’Brien was going around telling people, “You should be buying puts to protect yourselves.” At 10 percent down, they automatically had to sell, and that just made things worse. Those institutions had to sell; they were on autopilot. The autopilot should have been flicked off, but they couldn’t do it.
HAYNE LELAND: When we arrived at our office in Los Angeles, our trader was of course very busy selling. But things seemed, as far as I could tell, reasonably orderly. The futures price and the Dow were in sync. But as the market continued to accelerate downward and the volume ticked up, all of a sudden the system for getting orders on the floor began to back up, and there was a huge delay between being able to buy a future and being able to sell stocks, because the futures seemed undervalued relative to the stocks.
Because orders weren’t being executed until three hours later, the people who normally do index arbitrage said, “It’s too risky.” They could buy the futures, but they had no idea at what price they’d be able to sell the stock, because the orders weren’t getting executed for quite a while. Under normal circumstances, arbitraging would keep futures and stock prices pretty much aligned, but that wasn’t happening.
How did this affect us? If the futures were much cheaper when we sold them, we didn’t seemingly get fair value. Another way of saying it is the transaction costs of hedging with futures went way up. This raised the question of how much hedging we should actually do, recognising this very costly trading.
Eventually, toward the end of the day, futures were selling at a 10 percent discount to stocks, or at least the observed stock price. We had normally figured our transaction costs at one-tenth of 1 percent, but the spread had gone from one-tenth of 1 percent to 10 percent — 100 times more costly to trade than ever before in the existence of our programmes.
We had done some theoretical thinking about this, though we hadn’t had time to complete that research. We had found that if transaction costs go up a lot, you should lag behind your ideal hedging position. It’s not worth going all the way to the ideal.
So we were lagging behind, but our trader also announced that he was falling behind. We said, “Don’t fall too far behind. Why aren’t you selling more?”
He said, “If I put all these contracts that we need to sell on the market, the market might truly collapse.”
Obviously market conditions were chaotic. At some point, we got a call from the SEC asking what exactly was going on. He didn’t tell us we couldn’t sell, but we did feel to some degree that Big Brother was very interested.
ART CASHIN: They were using the programme trading on the Standard & Poor’s contract in Chicago. What began to evolve over the course of the day was that because you didn’t need a plus-tick rule in the Chicago futures pit, the selling there was more aggressive. You offer a million shares at the first plus-tick and keep following it down, and it’s like people piling rocks on your chest — pretty soon you can’t get a breath. In New York, however, the plus-tick rule was the way in which shorts, since the mid-1930s, were restrained. They could still weigh on a market, but they couldn’t drive it down.
With no plus-tick rule, futures were driving down rapidly. So in essence, while the Dow was trading at, let’s say, 2000, the S&P equivalent was trading at 1700 in Chicago at the same time. That brought in more and more pressure. Soon the thing began to cascade. It moved as if it had a will of its own. There was no bounce coming out of Chicago — if anything, there was added pressure.
A couple of stocks, when the pressure built up, did a trading halt. The hope was that a time-out, a pause, would allow people to come to their senses and would invite in some buying. Instead, what happened in most cases was that it produced extra sellers — so when the stock reopened, it opened even lower.
1:00 P.M.
ROBERT FAGENSON, SPECIALIST ON THE NYSE, FAGENSON & CO.: Our biggest concern was about having the liquidity to open the next day, or you’re out — you lose your business. I remember Bankers Trust, the lender to a lot of the NYSE specialist firms, had said around late mid-day that it wasn’t going to extend credit and terms. We were with Chemical Bank, and they said that as long as we didn’t do anything extreme or crazy, we had open credit.
That day, I stopped trading more stock than I ever have in my [37-year] career on the floor. At a couple of points, I remember a governor coming over to halt trades. But John Phelan had a calming influence. He had a presence everywhere: on the floor, in the offices and in the media. His experience is part of what got us through.
LEO MELAMED: We provided a price for the world. They may not have liked the price, because it was a lot lower than yesterday’s price. But at least it was a valve. And as Alan Greenspan said to me time and time again over the following years, no one is really able to calculate how important it was to know that there was a price. OK, you don’t like it. OK, you don’t want to sell at that price. But you could sell at that price. And you could hedge your bet, hedge your exposure, limit your risk — because there was a price.
In New York, for the most part, there were no prices. In effect, many stocks never opened that day. We were ultimately blamed for having caused the crash because we provided a price. Whatever caused the crash was fundamental to the market. This cause was not going to be found in Chicago. But it looked that way, because we were the messenger of the bad news, and you know what you do to messengers with bad news: You take off their heads.
DAN DORFMAN, FINANCIAL REPORTER, CNN AND USA TODAY: It was like Halloween came twice in the same month. It was a full-blown panic. I never got so many calls in my life in one day. When I’m on the phone with someone, I try to spend as much time as I can, because I feel that’s the polite thing to do. But it was difficult that day, because the phone just didn’t stop ringing. Sources, money managers, brokers. It was like they were going to lose every penny they had.
One trader told me that if the Dow was to get down another 5 percent — I don’t remember where exactly it was when he told me that, but I think it was down 14 or 15 percent at the time — that he was going out the window. In fact, that’s what he said he told his firm, Salomon Brothers. He said they put a security guard in the building near the window. The guy had his own money involved as well. Not only clients’ money, but his own money.
I said to him, “Don’t do it.” He said, “Dan, it’s not your money — it’s mine.”
It was the end of the world at the time. Everything rational had gone out the window. No one knew what was going on. People were losing untold amounts of money. They were panicking. There were people talking during the day that the Dow could go down as much as 1,000 points. Sheer emotion had taken over.
2:00 P.M.
PETER CAMMALLERI, NASDAQ TRADER ON SALOMON BROTHERS' TECHNOLOGY DESK: I had been recruited that year to work on the OTC market as an institutional market maker. We traded on the level-one montage at Nasdaq. My senior trader split the pad with me and said, “Sink or swim.”
The only way we got our orders done was to call the guys we knew: our competition who traded the same stocks at Goldman, Lehman, Donaldson and Merrill. We’d say to them, “Do you have any kind of buy side?” and we traded broker-to-broker. The seller had the responsibility to print the order. It was really the trust and relationships we had built within the bigger firms that got our orders through that day. We were all getting killed at the same time, so basically we decided either to live together or die together.
JOSEPH HARDIMAN, PRESIDENT OF THE NASD AND NASDAQ: There was much more pressure initially on the New York Stock Exchange, because they were the big liquid names. They were getting banged around pretty hard. That spread to the Nasdaq on Monday afternoon — that’s when it started to hit the lesser-known names and the less-liquid names.
I had been on the job only about six weeks. My predecessor, Gordon Macklin, who was really the founder of the Nasdaq, told me when I took over the job, "The market’s in great shape. Don’t worry about it."
Click here for audio clip.
I was at the office in Washington, D.C., on K Street. The thing I remember most on Monday afternoon was the number of telephone calls, dozens of them, that I was getting from Nasdaq market-making firms — primarily the wholesalers, but also some full-service retailers. They were urging us to close the markets, saying they were running out of liquidity, running out of capital and were not able to meet their obligations as market makers.
Closing the market was not something we wanted to do. We had talked about that possibility in advance. We were fearful of an even greater liquidity crisis in the event that the markets were closed. So we would take their calls, listen to them and urge them to hang in there.
At the same time, we were getting calls from the media and investors, saying that the market makers weren’t answering their telephones. At that time, Nasdaq was largely an electronic quotation system and an electronic execution system. So any trades except for orders of 100 shares or less had to be done over the telephone.
We sent examiners from our New York office to the offices of the major full-service firms and to the major wholesalers. We found that, yeah, that was happening. But it wasn’t because they were neglecting their duties. They were just overwhelmed.
We hung in there during the course of the day and refused to close. When people don’t have access to the capital markets, in terms of information or liquidity, there’s likely to be a greater panic, and that’s why we resisted the pressure to close. I still have flashbacks occasionally.
3:00 P.M.
LEWIS BORSELLINO, S&P FUTURES TRADER ON THE CHICAGO MERCANTILE EXCHANGE: At the time, I was the largest S&P futures trader in the pit, but on Black Monday I was in Switzerland.
Click here for audio clip. That morning, I was buying a gold watch for my wife. There was a ticker tape that ran on a building outside, and it said that the New York stock market had crashed. I looked at the guy who was waiting on me, and I said, “Hey, there’s something wrong with that tape!” He said, “No, monsieur. Don’t you know the United States stock market? It fall out of bed.” I started running out of the building, and the guy said, “Don’t you want the watch?” I said, “Stick that watch up your ass — I gotta get back to Chicago!”
Click here for audio clip.
3:30 P.M.
RICK KETCHUM: There was a brief attempt at a rally in the early afternoon, and then the thing went straight down. I was standing at the computer terminal on the floor of the division of market regulation with my senior staff.
My main recollection, in what became almost absolute silence among all of us, from 3 to 4 o’clock, was a screen that was totally red. Never stopped being totally red. Never saw a green blip. And a Dow index and an S&P index indication that went only one way: down.
4:00 P.M.
PETER COHEN, CHAIRMAN OF SHEARSON LEHMAN: I was in Beijing, but in constant touch with the office. There’s a 12-hour time difference between Beijing and New York. I went to sleep, and I woke up around 4 in the morning — 4 p.m. New York time — and I called the office to see what was going on. I got on the phone with our chief operating officer and said, “So, what happened? How did the day finish?”
He said, matter-of-factly, “Oh, it was down, you know, 508 points on 600 million shares.”
I got kind of annoyed with him. I said, “You know, I’m the only guy who’s willing to trek around the world. It’s 4 in the morning here, and frankly I don’t appreciate the humour.”
He said, “I’m not kidding.”
It took a few minutes to register. I said, “Let me think for a little bit. I’ll call you back in an hour.”
RICHARD TORRENZANO, VICE PRESIDENT AND CHIEF SPOKESMAN OF THE NYSE: The bell was ringing, and I could see this relief come over everybody. No one was thinking about tomorrow. But at that point we all had to start thinking about tomorrow.
ROBERT FAGENSON: My firm had survived, but in one day we lost an entire year’s profit. That night the New York Fed called the money center bank to make two points: One, credit was available, and two, the Fed expected — it demanded — that the banks extend credit to the specialists.
12:00 A.M., TUESDAY, OCTOBER 20, 1987
LEO MELAMED: It was past midnight in Chicago when I made it back to my office. My secretary handed me a stack of telephone-call slips. The first name was Alan Greenspan. It must have been 1 or 2 a.m. in Washington when I returned Alan’s call. He said two unnerving things: “Leo, will you open in the morning?” He understood that the longs have to pay the shorts in order for us to open in the morning. Our system, as the chairman knew, was pay-as-you-go. There’s no debt the following day. If anyone owes debt, by law we can’t open. It’s over. We’ve never had that happen in the history of our markets. We had fallen so much in price that the difference between what the longs owed the shorts was $2.5 billion. Two and a half billion dollars in today’s world? Ain’t that much. But then, it was a figure beyond imagination. Before we said goodbye, he asked me if there was anything else I could think of that [the Fed] should be doing. That scared me even more. Here was the chairman of the Fed asking me for that kind of advice.
God help me, I said to myself. We’re in trouble.
But you say funny things in moments like that. I said, “You better keep the Fed wire open.” He said, “Oh, my God, good idea!” Now, maybe he was joking. But maybe he wasn’t. To this day, I don’t know.
We sweated out the $2.5 billion until about 7 a.m., when I was on the telephone with the account executive of Continental Bank, our clearing bank. Our account executive, a woman named Wilma, said, “Leo, we’ve got all but $400 million.”
I said, “That’s all?” When I talked to Continental around 3 in the morning, we were still out $1 billion. But here we were at 7 a.m., 20 minutes to the opening, and we’ve got $2.1 billion. I said, “We’re done, Wilma! Let Continental put up the money. We’ll open the market.”
She said, “I haven’t got the authority.”
“Wilma,” I said, “you’re not going to let the world go down for a couple hundred million dollars!”
She said, “Leo, wait a minute — there’s Theobold!” He was chairman of the Continental Bank. “Let me ask him what to do!”
Honest to God, this is all how it went. I was on tenterhooks. She came back a minute later and said, “Theobold says it’s OK; go ahead.”
I called Alan Greenspan, and I told him we were going to open.
WHERE ARE THEY NOW?
Art Cashin is still on the floor of the New York Stock Exchange, as a managing director of UBS Financial Services Inc.
Leo Melamed remained chairman of the CME executive committee until 1991. He went on to found Melamed & Associates, a consulting firm. In the immediate aftermath of Black Monday, he testified before Congress and the blue-ribbon Brady Commission, which was established to investigate the causes of the crash.
Rick Ketchum left the SEC and later became president of the NASD and the Nasdaq Stock Market. He is now the chief executive officer of NYSE Regulation Inc., the regulatory arm of the New York Stock Exchange, and chairman of the Financial Industry Regulatory Authority.
Kenny Polcari is a managing director at ICAP, where he runs the U.S. equities division.
David Miranda worked as a specialist until 2007, when he was let go from his position. He is now director of client relations at Strategic Stock Surveillance in New York.
Hayne Leland and his partners, John O’Brien and Mark Rubinstein, continued to do business as portfolio insurers after the crash. On Wednesday, October 21, 1987, however, the firm developed a need for liquidity — as the market recovered and spiked, Leland O’Brien began receiving margin calls on its futures positions — requiring clients to generate cash quickly. Some clients backed out. Others continued to buy portfolio insurance through LOR, but the end had come. Leland has remained a professor at Berkeley; investigating the causes of stock-market crashes is among his research interests. He and his partners later invented another high-finance product, the exchange-traded fund.
Jim Rogers continues to manage his own investments. He became a globetrotting author and television commentator on the topic of the financial markets. He now splits his time between New York and Singapore.
David Ruder left the SEC in 1989 and is now emeritus professor of law at Northwestern University, where he has taught since 1961. Blair Hull went on to sell his trading firm to Goldman Sachs and, in 2004, ran for the U.S. Senate from Illinois, losing in the Democratic primary to Barack Obama.
Mario Gabelli is still the chairman and CEO of his eponymous investment firm. “Patience is difficult,” he wrote in a letter to his investors (for whom he managed about $2 billion) a day after the ’87 crash. “You hired us to manage your money and make tough decisions. Please do not challenge.” His firm now has $30 billion under management.
Robert Fagenson went on to become a director and vice chairman of the New York Stock Exchange. He remains the head of his own brokerage firm, Fagenson & Co., but will retire later this year as vice chairman and chief executive of Van der Moolen Specialists USA, the fourth-largest NYSE specialist firm.
Dan Dorfman, the Jim Cramer of his era, remained a powerful market-moving voice through the late ’80s and ’90s as a commentator on CNBC and a columnist for
Money magazine. In 1995, he was rumoured to have been the target of a federal investigation into possible insider trading, but this has never been proven, nor was he ever indicted. He is now a financial columnist for the
New York Sun.
Peter Cammalleri started an execution company on the floor of the NYSE. He has since left the industry.
Joseph Hardiman continued as president and CEO of NASD/Nasdaq for another decade, retiring in January 1997. He is now a private-equity investor in Baltimore.
Lewis Borsellino retired from the pits in 2003 after a long career. He now runs LBJ, a market-analysis service for day traders, and is the author of the memoir
The Day Trader: From the Pit to the PC.
Peter Cohen went on to spearhead Shearson Lehman’s acquisition of E.F. Hutton, which the crash and its aftermath had crippled. Cohen left Shearson in 1991 and has since founded Ramius Capital Group, of which he is currently managing partner.
Richard Torrenzano is now the chairman and chief executive of his own publicity firm, the Torrenzano Group.
The Best Worst Year Ever October 1987: a cultural snapshot SPORTS: Formula 1 racing driver Nigel Mansell triumphed in the Mexican Grand Prix.
POLITICS: In the United States, President Reagan launched airstrikes on assorted oil platforms in Iran. Good to know that ended all possibility of future conflict in the region...
OTHER NEWS: Hurricane winds battered Southern England, leaving 18 people dead and hundreds injured.
MOVIES: Filmgoers were gripped by Glenn Close’s stage-five clinginess in
Fatal Attraction.
TELEVISION: The hit show
Moonlighting, with Bruce Willis and Cybill Shepherd, seemed to be watched by everyone and was usually the topic of conversation at work the following morning.
MUSIC: Michael Jackson’s Bad, his follow-up album to his wildly successful
Thriller, topped the charts. Around this time as well, Jackson’s behaviour first began to get a little ... peculiar.
BOOKS: Scott Turow’s legal thriller
Presumed Innocent had the country turning pages as quickly as possible.
FADS: Mullets, shoulder pads (worn by men as well as women) and puffball skirts were all the rage.
