Do you recall what you were doing on October 19, 1987?  I sure do. Today marks the 20th anniversary of the stock market crash of 1987, when the DJIA experienced the worst single day percentage drop in history (approx 23%!).  To put this in perspective, this is the equivalent of the DJIA dropping about 3,000 points in one day from current levels.  At the time, I was 23 years old and under heavy fire working the trading phones at Schwab.  This was before internet trading, and before Schwab had call centers.  We were overrun.

I remember market makers not answering their phones, news crews in the office, cameras in our faces, and an armed guard in the lobby due to a death threat from a client when he was told his account would be liquidated if he didn’t cover his margin balance by noon that day.   I also recall all of us huddling around a speaker phone to hear Chuck Schwab update us on the current status and to remind us that our customers were counting on us and that we should just take things one customer at a time.  

The most important lesson I learned that day, which has served me well over the last 20 years, is to buy stocks in the face of severe market calamities.  It always looks like “it’s different this time” but it never is.  Markets go up, markets go down.  Maintain cash reserves to smooth effects of a market break and to take advantage of periodic market meltdowns when everybody else is heading for the exits.  Never let the markets hold you hostage by getting in over your head.    

Save regularly and aggressively, invest for the long term, and do not let your emotions get the best of you.  As long as you have a fundamental belief that people will try to better their lots in life, capitalism will work and markets will move higher over time.  And you and your families will build real wealth.  Remember, 1987 was an up year in the market!

I do love this business!

Mark Metcalf
Financial Advisor
Merriman