Back in time to October 17th 1987

I was listening to Peter Schiff’s podcast today and he said something I wasn’t aware of. Prior to Black Monday, October 19th 1987, the biggest one day decline in stocks in history, the Dow and S&P had had a particularly bad previous two trading days. Schiff said that the current setup reminds him of 1987.

On October 15th, the S&P was down 2.4%, from 305.2 to 298.1. On October 16th, it was down a further 5.2%. That in itself would have been considered an historic crash, had not the market absolutely crashed over 20% on Monday morning, October 19, 1987.

I did a search of the headlines on October 17, the day after the market closed down 5.2%, right before the infamous megacrash. I found this:

Stock prices collapsed in a broad selloff, with the Dow Jones industrial average suffering its first daily loss of more than 100 points. Waves of selling produced record volume of 343.2 million shares. The Dow’s loss of 108.36 points left it at 2,246.73, which was 235.48 points, or 9.49 percent, below where it began the week. The daily loss, amounting to 4.6 percent, is the sixth largest in postwar records. The breadth of the decline was stunning – only 111 Big Board issues managed to rise, while 1,749 declined. Weakness in the dollar and a related rise in interest rates are being given the blame for a correction that has now seen the Dow back off 17.5 percent, or 475.69 points, from the peak of 2,722.42 set on Aug. 25. [ Page 1. ]

Market professionals see no signs of calamity in the decline. Many of them like to remind nervous small investors that the market still has a sizable gain for this year. [ 1. ] Computerized trading by big institutions played a key role in the slide. [ 38. ] Washington officially maintained its stand of indifference to market developments. [ 39. ] The exchanges and trading houses had few problems handling the record volume, thanks to electronics. [ 38. ]

Here’s today’s headline from Bloomberg:

Stock Selloff Looks Overblown to Three Wall Street Strategists

Let us see what happens Monday morning. Money supply growth is low enough that a 1987 type event is possible.