Tuesday 16 September 2008

BLACK MONDAY 1987




















I remember 1987 well. I left a job in the City in September, heading back home from the bright lights and pavements of gold of London to start an Economics Degree. One of my senior brokers had simply told me if I wanted to last in the future that I’d be better off with something under my belt. Wise advice indeed.


So, one month later I was back in the safety of my home town (more on where that's gone in a later post), there were storms heading in from the Atlantic, literally and financially, and the UK was hit over a weekend by severe winds and rain. This caused much of the telecommunications links in the South East of the country to break apart.. But, things were about to get much much worse for a lot of people..


Come Monday (October 19), global financial markets dived in value. Everything suffered, commodities, shares, currencies. 23% was taken off the US stock market index in one day - the worst day of trading in history. In the UK many were frustrated by the lack of telecoms links to their brokers. People were stuck longer than they should have been in a declining market.


Once the dust settled it was clear that a whole range of capital values had been over-inflated relative to what the economy was really doing across most of the Western world (and Japan). Heightening unemployment and problems with currencies trading at too high values (hence export sales suffering and more job losses) meant the reversal was imminent. Thousands of job losses followed in the City, I would have probably been one of them, and the UK plunged into a period of massive bankruptcies, property repossessions and all round malaise.


Almost none of that time period’s problems exist today - though unemployment is now rising and property prices have been running at historical (hysterical?) highs.


So key question #1 today is “What is different from 20 years ago?”

The markets reliance on automated technology,

the raised speed at which end users (investors) can react,

the increased levels of information they can get their hands on,

and probably most worrying of all, the greater integration between financial markets and parts of the globe.


Here’s the link for a recap of 1987

http://www.youtube.com/watch?v=55hUK2DWyps&feature=related


Things aren’t all that bad yet. It’s more a grey type of Monday that we’ve just had rather than a black one.

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