Markets remember 'Black Monday'

The day now known as "Black Monday" was unlike anything investors had ever seen.

On Oct. 19, 1987, the stock market crashed, plummeting a stomach-churning 508 points, losing half a trillion dollars and 22.68 percent of its value in one frantic, chaotic day.

"Don't bother forecasting the days ahead," lamented a BusinessWeek magazine cover story the week after the plunge. "There are no precedents."

It was the biggest one-day drop the market had seen since Oct. 29, 1929, the start of the Great Depression. An equivalent crash today would be a staggering 3,196.31 points drop.

"Most people had never seen an event like that ... a drop of both that size and percentage," recalled Ron Samuels, WSFS Bank's vice president and assistant treasurer, who was working at a Wilmington, Del., credit card company at the time. "It was very unsettling, and nobody knew what was going to happen."

Today, on the 20th anniversary of the market meltdown, investors are remembering the crash and wondering whether it could happen again. Online commentary abounds on the similarities between the two eras:

A record-setting bull market (1982-87; 2003-07)

A weakening dollar

Tensions in the Middle East

Surging oil prices

Heavy computer trading

A new Federal Reserve chairman

A second-term Republican president

Credit problems, in 1987 with the savings and loan crisis, today with subprime housing

While acknowledging that anything is possible, market watchers and economists say they see little cause for another historic October crash.

"There is no fundamental reason for the stock market to plunge on Oct. 19, 2007," said Laurence Seidman, a professor of economics at the University of Delaware. "But there wasn't any fundamental reason for it to plunge on Oct. 19, 1987, either.

"The economy is structurally sound in the long run," Seidman said. "But in the short run, the stock market is moved by psychology, not fundamentals."

PNC Bank senior economist Robert Dye sees parallels between the equity markets of 1987 and the housing market today, noting that both were fueled by "exotic financial instruments that probably were not valued properly in terms of risk."