This being the 35th anniversary of the “Crash of ‘87” I could not miss the opportunity to reflect a little and promote a little project I am working on with some old friends.
A lot of time has passed since that day (along with a lot of interviews) and I can still remember certain things that have just never left me.
For one thing, it was the people that weathered an event that we never thought would happen, a complete collapse of the equity market. Prices dropping faster than we had ever seen before. Multiple times during the day, stocks were halted from trading because the pressure on those stocks was just too much for the market to handle. The panic in a lot of brokers eyes said it all. Yet, the market survived and with it came drastic changes.
At the time, I was the head clerk for an independent firm, Francis P. Maglio and Company. We had probably ten fairly large accounts from the United States and Switzerland that prior to Oct 19th executed roughly 1% of the volume on the NYSE. Our relationship with our customers was always paramount and that day solidified things for us and helped us build a company that ended up executing on some days, 7% of the volume on the trading floor.
Our senior partner, Frank Maglio, was a very tough guy to work for. He expected everyone to come in ready to work hard and give 150% everyday. He demanded excellence and he demanded loyalty and in return we were well compensated and we learned from him, every day. Every time I would come up with a great trading strategy for one of our customers, he would look five or six steps ahead and find a flaw. The customers loved that we tested ourselves and gave them the best that we could everyday.
Oct 19th was our true test. The strategies went out the window. It was “get it done” and do it some more, non stop. At one point we had over a hundred orders that needed to be executed while the brokers had stacks of orders in their hands that still needed to be completed as well. It was mayhem for sure but our real skill was simple. Never let your customer feel your stress and thankfully, we didn’t. They knew the World was collapsing but they didn’t ever sense any panic in my voice and in my partner’s voices. Yet in the booth, it was screaming crazy.
After it was all said and done, every client had their executions and by 5 o’clock we had finished our day with our customers and everyone of them came back and complimented the firm on it’s ability to help them. We may have been on the trading floor until 11:30 that night sorting, recapping and writing up reports but our clients were on the 5:19 to Greenwich so they could eat dinner with their kids.
While we were in the middle of that unprecedented time, the SEC and Federal reserve were in the background trying to secure financing for the multiple specialist firms on the trading floor that had run out of capital.
Since I like to explain things, to understand part of the reason for the speed of the crash was that the firms that were responsible for trading the individual stocks, the specialists, were woefully undercapitalized. They would normally have several million dollars to trade with on a daily basis and they did an excellent job utilizing that cash at the appropriate times but they never expected to be put to such a large test. They ran out of money early and without that source of supply (specialists in times of distress were typically the only buyers of stocks, cash runs out, they can’t buy), stocks tanked. The calls were made to bankers, from specialist and from the Treasury department, and money was forwarded to the specialist firms to stave off total collapse.
That day turned our small boutique shop eventually into the second largest independent firm on the trading floor. The customers we had eventually expanded as people moved on and paid us back wherever they went. We developed several different business models that eventually became the standard on the trading floor and after a great run, Maglio decided it was time to sell and we were purchased by The Bank of New York.
However, to put everything in context, this event was the first of several that precipitated bold initiatives from the NYSE and the industry itself. The small family specialist firms merged quickly with larger better capitalized firms. Those better capitalized firms eventually were bought by brokerage houses and whittle down from 57 firms to around 11 or so by the time 1990 rolled around. Today, there are two.
Enough with the reminiscing. It’s Wednesday and I should be torching someone today politically, socially or economically but I want to look at some positives.
As I have said a few times, life is a pendulum, it swings to the left for a while and swings to the right for a while. We may have swung a little too far left for a period of time but I do think things are falling back towards the center.
Politically, it seems that that pendulum will be nudging toward the right in November. If you can believe the polls that is. Notoriously inaccurate, it is hard to fully believe what the polls are saying but we can only hope.
This, I think will be a positive for the country. Having one party completely control the White House and both houses of Congress normally does not bode well for the US. Too few voices of reason carrying the message.
This country has been built on a system of checks and balances and having Congress rein in the President is part of that system. Right now, it is only the Judicial branch that is keeping everything in check.
I do not agree with a lot of what The Supreme Court has ruled on but I do believe they are trying to protect the Constitution (or their view of the Constitution) whereas no one else in government gives a damn about the Constitution. Without them, a one party government would run roughshod over the Constitution.
I digress here for a second. There has been a vocal minority that believes that the Constitution should be revisited. After all it was written over 200 years ago before Facebook, Twitter and The New York Times. I hope that idea dies a quick death. The Supreme Court, for better or worse, contains several Constitutional Scholars who do have the ability to interpret the document for today’s world. Adding or subtracting Constitutional amendments is an extremely hard thing to do, especially now, but it can be done and should there be a clamoring for something very specific, let the proponents and opponents thrash it out and see what the country feels about it, don’t destroy one of the most amazing documents ever written.
Back to my point, whatever it is. We may be back to a split Congress with a very unpopular President and while common sense would tell you that the next two years will amount to zero progress, I think that is what we actually need at this point.
Stopping some of the lunacy is my positive thought for today and with any kind of Republican control in Congress, the lunacy will slow down. It can’t ever end completely because these are politicians, after all, and that is how they operate.
Promotion time
I mentioned earlier about my old firm, Francis P. Maglio and Company, and our work during the crash in 1987. With that in mind, my old partners at the firm have been working on a film chronicling that day and the following couple of years. It will show the relationships, the craziness and the hard work that went into making our firm the success that it became. We fought against all of the big brokerage houses and built out a competitor that they could not stand. We are in the process of finishing up the script. We have several actors already committed to the project and we are working on funding( hint hint) and an executive producer. With something like this, it is more about the “Name” people you have attached and we are working on that as well. The script will be completed by Christmas and then we will start the real work, getting it made and hopefully have a studio interested in it.
Your a true Professional, right back in the saddle with excellent content. Yes, a day that will live in infamy, along with many other days, unknown at the time, to follow. I'm sure that I along with many others look forward to the completion of your next project, of the day and the years following. A look at it from the inside, because we know what it looked like from the outside;(
Thank you Rick!