A First-Class Catastrophe
The Road to Black Monday, the Worst Day in Wall Street History
1 of 1 copy available
On October 19, 1987, the Dow fell 22.6 percent—almost twice as bad as the worst day of 1929, and equal to a one-day loss of nearly 10,000 points today. Black Monday was more than seven years in the making and threatened nearly every US financial institution. Drawing on superlative archival research and dozens of original interviews, Diana B. Henriques weaves a tale of missed opportunities, market delusions, and destructive actions that stretched from the "silver crisis" of 1980 to turf battles in Washington, a poisonous rivalry between the New York Stock Exchange and the Chicago Mercantile Exchange, and the almost-fatal success of two California professors whose idea for reducing market risk spun terribly out of control. As the story hurtles forward, the players struggle to forestall a looming market meltdown and unexpected heroes step in to avert total disaster.
For decades, investors, regulators, and bankers have failed to heed the lessons of 1987, even as the same patterns have resurfaced, most spectacularly in the financial crisis of 2008. A First-Class Catastrophe offers a new way of looking not only at the past, but at our financial future.
"A valuable and unfailingly interesting account of a crucial two-decade period in Wall Street history. . . . A highly intelligent and perceptive analysis." —The New York Times Book Review
"A first-class cautionary tale that should be on every financial regulator's and policy-maker's desk—and many an investor, too." —The Washington Post
"A fast-paced thriller . . . the book is much more than financial history. It is a tale of unheeded warnings and misguided confidence that is essential reading for anyone who wants to understand how the fault lines in our modern markets came to be." —Bethany McLean, New York Times–bestselling coauthor of The Smartest Guys in the Room
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Creators
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Publisher
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Release date
July 2, 2024 -
Formats
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Kindle Book
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OverDrive Read
- ISBN: 9781627791656
- File size: 2951 KB
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EPUB ebook
- ISBN: 9781627791656
- File size: 3509 KB
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Languages
- English
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Reviews
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July 17, 2017
Henriques (The Wizard of Lies: Bernie Madoff and the Death of Trust) turns the clock back to Oct. 19, 1987, a date better known as “Black Monday,” when the Dow Jones plummeted 508 points—22.6% of the market at the time. Her report begins with the 1980 crisis in silver trading and then moves quickly onto the financial-futures markets, (the introduction of which “fundamentally changed the way the traditional stock market worked”) and continues with the rise of institutional investors and introduction of innovations such as computerized program trading. The SEC and other regulatory agencies, meanwhile, are shown to be “poorly equipped, ridiculously fragmented, technologically naive, and fatally focused on protecting turf rather than safeguarding the overall market’s internal machinery.” Henriques’s confident, fast-paced, and thoroughly researched narrative also features plain-English explanations of relevant jargon and insightful profiles of the investors, regulators, and economists on the crash’s front lines. Thanks to Henriques’s attention to detail, her book stands as an irrefutable argument against efficient-market theory—which understands stock-market performance as fundamentally the result of “rational and well-informed decisions”—and for wiser regulation of U.S. financial markets. It’s a must-read for anyone who wants to understand why financial markets lurch from crisis to crisis and are still so frighteningly susceptible to crashes today. -
July 15, 2017
Financial journalist Henriques (The Wizard of Lies: Bernie Madoff and the Death of Trust, 2011, etc.) turns her gaze on the catastrophic Wall Street collapse of 1987, "the contagious crisis that the system nearly didn't survive."The crash of 1929 was miserable, the dot-com bubble burst of 2000 inconvenient, and the financial collapse of 2008 frightening. All these pale, however, to the events of Oct. 19, 1987, Black Monday, a one-day decline of 22.6 percent. To reach the same level today, writes the author, the Dow Jones would have to fall by 5,000 points. As Henriques writes, it was a perfect storm of allied causes, all of them ones that would ring true to cautious investors today: the financial firms had become too big, certainly too big to fail, while computer-mediated trades and other flashy innovations placed the exchange beyond immediate human reach. As bad or worse, the same ideology, the same set of academic theories, was driving Wall Street, leading to a monoculture of investment that was ripe to fail from the start. The author, a longtime New York Times writer and winner of the George Polk Award, delivers an account that is not for the financially naive or the innumerate; a typical passage reads, "unfortunately, there were CBOE limits on how many options any one investor could hold at one time, and LOR was already 'insuring' accounts too large to fit easily within those limits." Those who can read past the financial wonkiness, though, will be well-served by Henriques' insights into the ascent of the quants and the concentration of big capital into fewer and fewer hands--trends that, she notes, continue to accelerate as investment strategies become "even more obscure." Solid economic reportage. Investors who remember the events of 30 years ago will blanch all over again, especially at the author's suggestion that worse may be yet to come.COPYRIGHT(2017) Kirkus Reviews, ALL RIGHTS RESERVED.
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Starred review from September 1, 2017
The 22.6 percent stock market drop on October 19, 1987, aka Black Monday, was the worst single day in Wall Street history. Author and New York Times journalist Henriques (The Wizard of Lies) cites as underlying causes the laissez-faire approach to business by the Ronald Reagan administration, market computerization, highly leveraged financial derivatives, and increased dominance by institutional investors. A lack of resources and coordination by regulators, says the author, allowed for a build up of complexity and risk, with new strategies such as portfolio insurance, index arbitrage, passive index investing, and program trading increasing volatility. Henriques combines industry moves with the personalities of market participants to take readers to the precipice of the collapse and beyond, lamenting that after the crash few reforms were made, which set the stage for future market turbulence, including the 2008 crisis. VERDICT The author's journalistic storytelling will bring a deeper understanding of Black Monday to all readers in the same way Andrew Ross Sorkin's Too Big To Fail did for the 2008 crisis. [See Prepub Alert, 3/27/ 17.]--Lawrence Maxted, Gannon Univ. Lib., Erie, PA
Copyright 2017 Library Journal, LLC Used with permission.
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April 15, 2017
A George Polk winner, Pulitzer Prize finalist, and New York Times best-selling author (The Wizard of Lies), Henriques brings strong skills to bear on her investigation of Black Monday, October 19, 1987, Wall Street's worst day ever.
Copyright 2017 Library Journal, LLC Used with permission.
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September 1, 2017
The 22.6 percent stock market drop on October 19, 1987, aka Black Monday, was the worst single day in Wall Street history. Author and New York Times journalist Henriques (The Wizard of Lies) cites as underlying causes the laissez-faire approach to business by the Ronald Reagan administration, market computerization, highly leveraged financial derivatives, and increased dominance by institutional investors. A lack of resources and coordination by regulators, says the author, allowed for a build up of complexity and risk, with new strategies such as portfolio insurance, index arbitrage, passive index investing, and program trading increasing volatility. Henriques combines industry moves with the personalities of market participants to take readers to the precipice of the collapse and beyond, lamenting that after the crash few reforms were made, which set the stage for future market turbulence, including the 2008 crisis. VERDICT The author's journalistic storytelling will bring a deeper understanding of Black Monday to all readers in the same way Andrew Ross Sorkin's Too Big To Fail did for the 2008 crisis. [See Prepub Alert, 3/27/ 17.]--Lawrence Maxted, Gannon Univ. Lib., Erie, PA
Copyright 2017 Library Journal, LLC Used with permission.
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