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The Crash of ’87, from the Wall Street Players Who Lived It
- ukulele 9y agoThe stories are interesting to get a sense of what things were like, but they fall short as evidence of who knew what was going on in the moment. Holding up a stock analyst who "saw it coming" is survivorship bias in the extreme.
- whatok 9y agoI mean, I don't see it being depicted in any way besides "hey here's what I experienced". A lot of people actually mention being caught off-guard and taking massive losses on the Monday itself. The "stock analyst", Paul Tudor Jones, is probably the most famous one who "saw it coming" but knowing something is coming doesn't necessarily mean you are able to profit from it.
- csours 9y agoThe article itself calls this out: > Most of the people willing to share their memories count themselves as winners who seized the moment as an opportunity not only to make money, but also to insert themselves in the new financial order—Paul Tudor Jones, Stanley Druckenmiller, Nassim Nicholas Taleb.
- pseingatl 9y agoPaywalled. So I can't determine whether the author reports the effect of an FBI undercover operation running out of the Chicago Board of Trade's commodity pits. An untrained (not with respect to guns, of course) undercover agent was trading with the FBI's practically unlimited money. His wild card futures trading negatively affected those commodity prices, which in turn affected stock prices, which in turn...you get the picture.
- hkmurakami 9y agoBloomberg paywalls? (I was able to click through the headline and see the article) Out of curiosity what's Bloomberg's paywall trigger?
- adventured 9y agoSometime in the last few months they've begun paywalling more and more content on Bloomberg.com. They had been doing that with their Businessweek division for a long time. They have a note at the paywall cut-off that says (summarizing): sign-up for a free Bloomberg account to get unlimited access to articles (portfolio tracker, video content, etc). Opening a new incognito browser seems to bypass the paywall, so I guess they're using a basic cookie check for now (5-6 articles in N time). They're nudging people to free accounts, so I guess they're not looking to be overly aggressive just yet.
- technofire 9y agoDoes anyone else find it surprising and remarkable that Paul Tudor Jones' monospaced letter is perfectly flush on the left and right margins with apparently no hyphenation nor additional inserted spaces within the lines? Surely this did not happen by coincidence (?).
- pm215 9y agoLooking closely, it doesn't actually seem to be monospaced. For instance in the last-but-two line the "t" in "we project" is pretty much midway between the two letters of "it" in the line below it. The text has been justified I think both by increases in inter-word spacing and by putting slightly more space between letters as necessary.
- 35bge57dtjku 9y agoDoes that mean there's a 1/4 space button on his typewriter that he started using towards the end of the line?
- netsharc 9y agoPresumably done by an electronic typewriter? AFAIK they would buffer a line (or more?) of whatever you're writing, and when you hit enter, everything will be printed/punched out. I'm guessing it has a setting to justify, and it does that by adjusting the gaps between letters.
- justin66 9y agoIndeed. With a font that's monospaced (or close) that kind of justification isn't hard. I had a typewriter that could do that. (I don't remember how it handled hyphenation) Those typewriters were an odd generation, technology between PCs and the older but more expensive IBM Selectric typewriters. I cannot remember if mine was called a "word processor" (I don't think so) but it certainly had a little 8-bit computer in there.
- bgun 9y agoDefinitely not monospaced. These four words are all 5 letters but different lengths. https://i.imgur.com/Iq6cVhl.png https://i.imgur.com/Iq6cVhl.png
- nateguchi 9y agoThis happened just after the Great Storm of 1987 which hit the UK on the 15th-16th October. Wikipedia has the following slightly unbelievable snippet: "Following the storm few dealers made it to their desks and stock market trading was suspended twice and the market closed early at 12.30pm. The disruption meant the City was unable to respond to the late dealings at the beginning of the Wall Street fall-out on Friday 16 October, when the Dow Jones Industrial Average recorded its biggest-ever one-day slide at the time, a fall of 108.36. City traders and investors spent the weekend, 17–18 October, repairing damaged gardens in between trying to guess market reaction and assessing the damage. 19 October, Black Monday, was memorable as being the first business day of the London markets after the Great Storm.
- marak830 9y agoA side note, and I'm really hoping someone can explain this. What benefit does the stock market provide to us? I understand investing in companies, but for me, and I'll admit a completely naive person to this whole system, it seems to have taken an 'inbest in company with money to help them succeed', to a 'who cares let's just cut and run to make the best profit'. I'm perfectly willing to take a link to a great explanation at this point btw.
- S_A_P 9y agoKeep in mind that the stock market is only one part of the financial markets. There’s treasury (Tbill),forex, bond, metals, and derivatives of all of these(futures/swaps etc) and then other instruments used for hedging. All of these markets directly affect the movement of money all around the world. Also keep in mind that most trades are executed with a hedge in place to prevent losses. The market is rarely a case of bet a million on black trades. That said my knowledge is comes from knowing how energy and metals are traded.
- deleted 9y ago[deleted]
- lmm 9y agoThink about how something like, say, Heroku would look to someone outside the tech industry - so this is a company where people submit programs and they run them - not even on their own computers, but on Amazon's computers - and somehow that's something that makes a profit? There are lots of small intermediaries in finance, like in any industry. They make money because they provide services that others find valuable.
- marak830 9y agoI still don't understand. (this may be because I am not familiar with Heroku aside from hearing about it in passing). Thanks for trying though. Edit: I'm editing further to ask more Edit2: so you said that they make money because they provide services. What services could you offer when (from what I can see): Company A: wants investors. So promises them a portion of profit based on investment. I can't see any value from any other provider there. Now I may be wrong, and I'll admit straight off the bat I have * no idea * how it all works, but it seems to meet that there isn't any other value provided to the company, or to the initial investor aside from, buy these shares of the company, hold these shares, or I want to sell these shares.
- duncan_bayne 9y agoI'm old. I remember one of my friends and classmates - aged 8 - losing some money his parents had given him to learn how to buy stocks.
- cheez 9y agoWave principle represent
- justherefortart 9y agoMy fake portfolio as a kid was heavily IBM weighted. I think it was 120 or 126/share before the crash. This is one of the reasons I got a degree in finance (and economics). I wanted to know what to do with my money if I ever had any.
- yan 9y agoDid your degree help you with that decision?
- madengr 9y agoYeah, inquiring minds want to know.
- justherefortart 9y agoCertainly. I've self funded several startups and worked a broad array of positions in my career. I tend to work a year for somewhere then work a year or so for myself. Get bored with that then go get a job. Rinse/Repeat. The craziest thing is now I have dual incomes (well dual earners) with my wife finally finishing grad school. So much spare money (DINK).
- mitsubishi77 9y agoSounds like a strange logic to me... Is that not like wanting to become a MD just so you can "know what to do" if you ever get sick?
- danvoell 9y agoLet's say there is a big crash coming, where would you put your money for a safe bet and for a speculative bet (and please don't say bitcoin) ? During the crash of 87, it seems like you could still get a good fixed income yield. Parking it today for 1.5% just doesn't seem that valuable.
- Lost_BiomedE 9y agoSafe bet: cash. Speculative bet: put options.
- AnimalMuppet 9y agoIt seems to me that holding the stock but buying put options is not speculative; it's merely buying insurance. Why do you regard it as speculative? Or were you referring to selling put options?
- vtange 9y agoPut options lose value over time. You are speculating on the near-term risk of stocks losing value - effectively trying to time the market/predict the weather. Selling put options is a bet that the put options will expire worthless, which is a bet that stocks will continue to go up/not fall. I honestly believe the insurance analogy for options is misleading. The value of an option is quite literally the difference in value between selling the stock at market price and at the option strike. As a stockholder you don't save yourself as much from buying put options regularly as you would from say getting a surgery covered with health insurance.
- Lost_BiomedE 9y agoBuying naked puts. It is like shorting but very leveraged and must be timed.
- eru 9y agoI wonder if you turn writing naked puts into something like value investing? Figure out from fundamental what you think is a decent value for the stocks in question, then write puts for that strike price.
- excalibur 9y agoVery ominous Breaking News headline at the top of this article right now: "Dow Passes 23,000 for the First Time"
- excalibur 9y agoAnnnnd it's gone, but not forgotten.
- PatientTrader 9y agoCrashes are actually great for the middle class. The value of the dollar increases as prices come down. Homes, land, property, etc all become cheaper during crashes. This "bull market" is the actual "crash." All its doing is depleting the value of your money
- forapurpose 9y ago> Crashes are actually great for the middle class In perhaps one narrow sense. The middle class people who lose their jobs and savings, or whose welfare depends on economic activity (i.e., almost everyone) such as others buying, selling and investing in things don't do so well. Perhaps there is some data on how well the middle class did in 1929, 1988, 2008, etc.
- jonwachob91 9y agoIt's also ignoring the amount of middle-class savings that are destroyed during the crash... The ONLY middle class individuals that benefit from a crash are those with the cash to buy in at the depreciated prices.
- PatientTrader 9y ago> It's also ignoring the amount of middle-class savings that are destroyed during the crash Cash savings actually increase in value during crashes. Crashes provide the middle class with opportunities to purchase assets that they otherwise would not be able to afford.
- jonwachob91 9y ago> Cash savings actually increase in value during crashes. I get that, but you have to have cash savings before you can purchase assets. MOST middle class individuals can't afford to keep their savings in cash. MAYBE they keep 6 months of salary in cash in the event of a lose of work, but every other saved dollar is put to work. You'd have to destroy their life savings to give them a decent opportunity to buy assets on the cheap.
- DINKDINK 9y ago"The nascent equity options market saw assumptions based on the Black-Scholes model overturned and replaced by a more complex world of volatility skews" Black-Scholes is based on an assumption that stock moves are normal/Gaussian distributed. If have a background in statistics, that should make you revolt.
- vm 9y agoBlack-Scholes was prescient went it first hit the scene in the late 60s/early 70s. Ed Thorp (who independently derived the formula before B-S published it) made tens of millions of dollars applying it through his statistical arbitrage hedge fund. It was the most accurate predictor at the time. It's also remarkable that four people independently derived the formula: "In coming up with a trading strategy for warrants, Ed discovered a handy formula. A few years later, three finance professors independently came up with their own slight mathematical variant of the same formula. Ed Thorp, Myron Scholes, Robert Merton, and Fischer Black all had almost the same formula, but each had a different reason for believing it was true. Ed showed that it was a way to make money..." Source: The Poker Face of Wall Street (Wiley 2006)
- sjg007 9y agoThat and cointegration.
- aswanson 9y agoEurodollars are U.S. dollars deposited in commercial banks outside the United States and futures tied to the interest rates paid on them are among the most-traded contracts in the world. Even back then, they had crazy derivatives.
- jnordwick 9y agoIts not crazy at all. A eurodollar contract gives a purer valuation of the dollar since it doesn't need to consider the added cost depository requirements. Then like now, they are only crazy if you don't understand them.
- aswanson 9y agoSo it's like a more speculative bet on the overseas bank being able to make riskier loans with a higher return profile?