Here’s a tip — if you’re naming a memorable event, try not to put the day of the week in it. It’s awkward when it comes to anniversaries. Let us nonetheless take a moment to pause and reflect, with Deutsche Bank’s Jim Reid:
25 years ago today the financial world went into paralysis as Black Monday struck stock markets around the globe. For context the DOW dropped 22.61% that day (the biggest % down day in history) or 508 points to 1738.74. I wish I’d have invested my paper-round money in the market at the close. Instead I was saving up for a new shiny Walkman – my 1980s version of today’s Apple addiction. To this day no-one can really explain why the crash happened which is one of the endless fascinations with financial markets generally. Many things through history remain unexplained and rational analysis is often the least helpful thing. One of the many explanations for the crash was flaws in program trading in the early days of computer trading.
Computer trading, you say? Cue a buh-jillion parallels to be made between 80s bots and more recent flavours of technology gone wild. The short list includes: Knight Capital, Facebook, high-frequency trading generally, and now even Google.
Philosophical thought of the day goes to E.E. “Buzzy” Geduld. When Black Monday rolled around, he was in charge of 60 equity traders at Herzog, Heine & Geduld Inc. Bloomberg quoted him pondering crowd management then and now:
“In 1987 everybody tried to go to the exit at the same time, but the exit door wasn’t big enough,” Geduld said in a telephone interview. “You had literally a panic. Fast forward to 2012. The volumes we can handle are gigantic, but the exit door hasn’t changed in size.”
Admittedly, what really got us about the quote more than anything is the guy’s name in combination with it. Not “Buzzy”, but “Geduld”. In German and Dutch (possibly other languages too), it translates as “patience” or “forbearance”.
Talk about one for the names-fitting-professions debate… and in any case, Happy Black Monday this Friday.
The Top Ten ’80s Robots (We Expected to Exist By Now) – Cracked.com
Black Monday Echoes With Computers Failing to Restore Confidence – Bloomberg
Rage against the machine – FT
Run-up to Halloween has bedevilled investors – FT