October 19, 2011
“Black Friday” 24 years later . . . .
Posted by David Groshoff

Building a bit on Usha’s post earlier this week regarding “Enron: Ten Years Later,” I figured that I’d chime in that today, October 19, 2011, essentially represents the 24th anniversary of “Black Friday,” Octobter 19, 1987 (an off-day in that year’s World Series that featured the St. Louis Cardinals, who are also appearing in this year’s Series, which begins tonight).  

And while today’s students may have even less of an appreciation of what caused the US equity markets to tank more than 20% in one day than they do of Enron, what’s interesting to me is that those markets essentially rebounded to their mid-1987 highs in about two years.  Yet here we are in 2011, amid the Great Recession, years after a major weekly decline in early October 2008, and we haven’t come close to regaining the prior equity market highs reached in 2007. 

While this one felt different for so many reasons (one of which was that I was only in high school in 1987, despite being a loyal follower of Louis Rukeyser’s perma-bull PBS program Wall $treet Week), including the rise (or recognition) of globalization, significant financial engineering (and faster and more powerful trading technologies to implement such engineering), and the re-regulation that occurred throughout the 1990s and 2000s), I question how long the U.S. equity markets as a whole (forget about the residential real estate markets or other markets, including those that may have risen, such as certain precious metals) will regain those pre-Great Recession highs and what that means for the many retirees or hopeful retirees, many of whom had dollar-cost-averaged much of their life savings in “employer sponsored” defined contribution plans (many of whom I suppose did not offer choices. in precious metals funds), the subject of a later post. 

Anyway, Happy 24th Anniversary, if you can call it that!  No comments on whether a re-allocation from equities or gold is proper, given that next year is the silver anniversary.

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