What makes an economy suddenly collapse? This has been a question that puzzles economists for centuries. After nearly a decade of rapid growth, why did the U.S. economy suffer a major setback during the 1980s and why did this occur on a Monday, specifically Monday October 19, 1987, which thereafter became known as "Black Monday."
This particular Monday was not extraordinary in other terms. In fact, the reason the study of this stock market crash is so interesting is because there was no precedent to cause a loss of Dow Jones value of 22% in a single day. Brokers and investors who had used leverage to increase their stock holding positions all got margin calls on that Black Monday.
A margin call is not a nice thing. When any investor gets a margin call, it means the money they have borrowed no longer has sufficient collateral backing up the loan and this forces the liquidation (selling) of the stocks or bonds in the account to regain the proper balance between value of collateral and the amount loaned on the collateral.
On Black Monday, everything was worth about 20% less than the previous Friday. This triggered a margin call landslide because suddenly all the accounts trading on loaned funds (on margin) were out of balance. The forced sell-off of assets, to cover the positions, only made matters worse.
This enhanced DVD explores the reasons why all this happened and the recovery that followed.
October 87: Crash & Comeback
- Enhanced DVD
- ISBN: 978-1-61616-464-5
- Run Time: 46 Minutes
- Copyright Date: 2008