My wife Susie and I were walking down the beach last weekend discussing "Black Monday". We were discussing the amount and percentage of that drop and comparing it to what is going on in today's economy. We talked about what had happened then, and the differences in then and now.
I guess you could say that Black Monday actually started on Friday October 16, 1987. On that day the Dow Jones Industrial Average dropped 100 plus points. Now by today's standards that's considered a drop in the proverbial bucket. At the time however, with the Dow poised at 2,200, that was enough to have people talking all weekend about the stock market.
Looking back, I know that I thought the market would spring back on Monday morning. Boy, was I wrong. Seems that all of the talking by everyone over the weekend had everyone in a state of near panic.
Back then, it seemed like Monday morning would never come. As stock brokers we had witnessed the market close above 1,000 for the first time in several years, in 1982. In the next five years it had more than doubled which was an incredible return. Now, as brokers, we all had a strong confidence that the 100 points lost on Friday would easily be made up, and then some, on Monday.
Well that is NOT what happened. The market opened, and in less than an hour it was down another 100 points. That was the beginning of a crushing day on Wall Street. By the end of the day the Dow had lost 508 points. That day, October 19, 1987, became known as "Black Monday". People invested in the stock market saw their portfolio value drop over 25% between Friday' and Monday's trading.
There were changes as a result of those days in October of 1987. These were changes which were designed to prevent such a thing from happening again. And now we have today's crisis. What happened between then and now?
Back then, it didn't take long for the market to regain momentum and close above 2,000 again. It did take the overall economy a period of time to stabilize. New regulations boosted confidence in the "system" and as a result there was more order in the financial markets. From then until now is much different.
There appears to be more greed on Wall Street for starters. Add to that the loosening of regulations, the dramatically falling value of the dollar, real estate values which plummeted over a year ago and have yet to recover, foreclosures at all time highs, a $700,000,000,000.00 bailout which was basically forced on the American public as part of a plan to clean up for the errors of corporate America's and regulator's failures and well what do we have?
Although the Federal Government doesn't like to mention it, we are in a recession. I also feel that we are going to see the situation reaching more and more households. We may also see more bank failures, job losses, and more foreclosures. With more and more dollars circulating almost on a daily basis, your purchasing power is declining steadily as well.
In closing I have two questions. First, have you seen this coming for a long time? And even more importantly, what are you doing now, right now today, to secure your and your family's financial tomorrow?