The 1987 Crash-Revisited

In 1987, the financial world was close to a total melt down. Dogs and cats sleeping together. It was ugly. I wasn’t trading yet. I was clerking for a big options local.

I watched the carnage. It was the most amazing market I ever saw, including the Flash Crash. The Flash Crash was a mere blip when it came to 1987. There was a prep week for that, then the day, and the aftermath. The Crash of 87 was more like a four act play.

This video at Futures Magazine is one of the best that I have seen explaining the crash. It doesn’t have an embed feature, so you will have to click over and watch it.

The video has it all. Technical talk with easy translation. It shows most of the behind the scenes structure that existed in the market, and explains how it all broke down. The video is from the perspective of the $CBOE trader. But, traders at other exchanges ($CME, $NYX, $NDAQ) don’t have a vastly different perspective.  It’s disruptive, and calming at the same time.

The video also has a lot of elements of all kinds of current debates. What should the structure of the marketplace be? What role do entrepreneurs play? Andy Kessler’s “investing in the fog” theme.  The advent of technology makes things way more efficient, and cuts fat out of marketplaces.

And lastly, the ability to confront your fear, step up to the plate, and take a swing-knowing full well that you could fail.

Traders and entrepreneurs aren’t a lot different than gunslingers in the old west movies they make in Hollywood.