black monday slides
TRANSCRIPT
-
8/2/2019 Black Monday Slides
1/17
BLACK MONDAYBy: Rehan Ur Rahim
Sohaib AhmedUsama AkramHassan Akhtar
-
8/2/2019 Black Monday Slides
2/17
Introduction
Black Monday refers to Monday 19 October1987
Stock markets around the world crashed Shedding huge volumes in very short time
The Dow Jones dropped by 508 points
(22.61%) Twice as bad as 1929 decline that had started
the Great Depression
-
8/2/2019 Black Monday Slides
3/17
-
8/2/2019 Black Monday Slides
4/17
-
8/2/2019 Black Monday Slides
5/17
Internal Causes
Mergers and takeovers 1982
Use of Junk bonds and IPOs for Capital
required Derivative securities which include index
options in which stocks are not actuallybought but the rights to buy and sell thestock are bought.
-
8/2/2019 Black Monday Slides
6/17
Internal Causes
Increase in use of Micro computers
The market was controlled and prices were
set by computers instead of investors When the price of stock fell below the preset
price the computer sold the stock which ledto carelessly buying and selling of stock sothe market crashed.
-
8/2/2019 Black Monday Slides
7/17
Internal Causes
Illiquidity in the market as there were onlysellers and no potential buyers so there was ashortage of cash.
Another factor was the large trade deficit ofUS.
The currency was weakened which forced the
investors to pull out of the market. The high return on investment on long term
bonds caused less people to take risk andmake investments.
-
8/2/2019 Black Monday Slides
8/17
Internal Causes
There was also an overvaluation of stocksbefore the crash in 1987
The price/earnings ratio and price/dividendratio were too high
-
8/2/2019 Black Monday Slides
9/17
External Causes
Disputes between US and European countriesabout interest rates and foreign exchangerates.
Secondly there were also speculations aboutinflation in the economy.
-
8/2/2019 Black Monday Slides
10/17
US government reaction
The US central bank provided liquiditythrough OMO.
Helped commercial banks by giving discountson heavy reserve needs.
Interest rates on short and long term financialinstruments were dropped provide liquidity
Eased credit conditions to ensure thatinvestors could continue operating.
-
8/2/2019 Black Monday Slides
11/17
Reforms
Circuit breakers were introduced.
A mechanism by which trading would bestopped for 1 hour if the DJIA dropped morethan 250 points in one day.
It would again be stopped by 2 hours again ifthe DJIA dropped another 150 points making
it a total of 400 points in one day. The circuit breakers were installed primarily
to prevent extreme changes in the stockmarket.
-
8/2/2019 Black Monday Slides
12/17
Reforms
A uniform margin requirement is anotherchange that was introduced after the crash.
It aims to reduce volatility for stocks, futuresand stock options.
After the crash, some stock exchangeschanged their computer systems in order to
improve data management, effectivenessand increase accuracy.
-
8/2/2019 Black Monday Slides
13/17
Impact on the Economy
Expected Recession.
However, there was no recession within the next 2 years
Due to the intervention by the central bank of the U.S., theFederal Reserve.
Industries that were not directly tied to the stock marketswere not influenced.
Many U.S. corporations announced they would repurchasetheir own stocks, implying that they felt that the price dropwas unnecessary.
Moreover, continuous good news about the U.S. economyspeeded the recovery from the market collapse.
-
8/2/2019 Black Monday Slides
14/17
Impact on the Economy
15,000 jobs were lost in the financial industry.
Some serious business lenders saw it as
another great depression But by mid 1990s the economy began to
grow again.
-
8/2/2019 Black Monday Slides
15/17
22 Most Effected Stocks of
Dow Jones Index American Express Co. (AXP.N) - down 30.9
percent
Goodyear Tire (GT.N) - down 29.4 percent
Eastman Kodak Co. (EK.N) - down 29.1percent
Honeywell (then Allied Signal) (HON.N) -
down 28.4 percent Procter & Gamble (PG.N) - down 28.2
percent
3M Co. (MMM.N) - down 27.9 percent
International Paper (IP.N) - down 25.1percent
Navistar NAVZ.PK - down 25 percent
Coca-Cola Co. (KO.N) - down 24.5 percent
Alcoa Inc. (AA.N) - down 24.2 percent
International Business Machines (IBM.N) -down 23.2 percent
AT&T (T.N) - down 22.6 percent
United Technologies (UTX.N) - down 20percent
Exxon ( proceeding Mobil merger) (XOM.N)- down 19.5 percent
General Motors Corp. (GM.N) - down 18.9
percent Du Pont Co. (DD.N) - down 18.8 percent
McDonald's Corp. (MCD.N) - down 18.3percent
Merck & Co. (MRK.N) - down 17.9 percent
General Electric Co. (GE.N) - down 17.5percent
Chevron (preceding Texaco merger) - down16.7 percent
Altria (then Philip Morris) (MO.N) - down14.7 percent
Boeing Co. (BA.N) - down 11.75 percent
http://www.reuters.com/finance/stocks/overview?symbol=AXP.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GT.Nhttp://www.reuters.com/finance/stocks/overview?symbol=EK.Nhttp://www.reuters.com/finance/stocks/overview?symbol=HON.Nhttp://www.reuters.com/finance/stocks/overview?symbol=PG.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MMM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=IP.Nhttp://www.reuters.com/finance/stocks/overview?symbol=KO.Nhttp://www.reuters.com/finance/stocks/overview?symbol=AA.Nhttp://www.reuters.com/finance/stocks/overview?symbol=IBM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=T.Nhttp://www.reuters.com/finance/stocks/overview?symbol=UTX.Nhttp://www.reuters.com/finance/stocks/overview?symbol=XOM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=DD.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MCD.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MRK.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GE.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MO.Nhttp://www.reuters.com/finance/stocks/overview?symbol=BA.Nhttp://www.reuters.com/finance/stocks/overview?symbol=BA.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MO.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GE.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MRK.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MCD.Nhttp://www.reuters.com/finance/stocks/overview?symbol=DD.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=XOM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=UTX.Nhttp://www.reuters.com/finance/stocks/overview?symbol=T.Nhttp://www.reuters.com/finance/stocks/overview?symbol=IBM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=AA.Nhttp://www.reuters.com/finance/stocks/overview?symbol=KO.Nhttp://www.reuters.com/finance/stocks/overview?symbol=IP.Nhttp://www.reuters.com/finance/stocks/overview?symbol=MMM.Nhttp://www.reuters.com/finance/stocks/overview?symbol=PG.Nhttp://www.reuters.com/finance/stocks/overview?symbol=HON.Nhttp://www.reuters.com/finance/stocks/overview?symbol=EK.Nhttp://www.reuters.com/finance/stocks/overview?symbol=GT.Nhttp://www.reuters.com/finance/stocks/overview?symbol=AXP.N -
8/2/2019 Black Monday Slides
16/17
References
http://www.oppapers.com/essays/Black-Monday/121540
http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123
http://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htm
http://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.html
http://www.economist.com/node/9993586
http://online.wsj.com/article/SB119212671947456234.html
http://www.newspaperarchive.com/DailyPerspectiveFullView.aspx?ViewDate
=10/19/2007 http://www.greekshares.com/black_monday.php
http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019
http://money.usnews.com/money/business-economy/articles/2007/10/19/the-
lessons-of-black-monday
http://www.oppapers.com/essays/Black-Monday/121540http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.economist.com/node/9993586http://online.wsj.com/article/SB119212671947456234.htmlhttp://www.newspaperarchive.com/DailyPerspectiveFullView.aspx?ViewDate=10/19/2007http://www.newspaperarchive.com/DailyPerspectiveFullView.aspx?ViewDate=10/19/2007http://www.greekshares.com/black_monday.phphttp://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://money.usnews.com/money/business-economy/articles/2007/10/19/the-lessons-of-black-mondayhttp://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.reuters.com/article/2007/10/19/us-usa-markets-1987-dow-idUSN1930010920071019http://www.greekshares.com/black_monday.phphttp://www.newspaperarchive.com/DailyPerspectiveFullView.aspx?ViewDate=10/19/2007http://www.newspaperarchive.com/DailyPerspectiveFullView.aspx?ViewDate=10/19/2007http://online.wsj.com/article/SB119212671947456234.htmlhttp://www.economist.com/node/9993586http://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.accessmylibrary.com/article-1G1-54115260/market-crash-1987-changed.htmlhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://www.stockbreakthroughs.com/articles/1987-stock-market-crash.htmhttp://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://ezinearticles.com/?Black-Monday---Stock-Market-Crash-of-October-19th,-1987&id=2204123http://www.oppapers.com/essays/Black-Monday/121540http://www.oppapers.com/essays/Black-Monday/121540http://www.oppapers.com/essays/Black-Monday/121540 -
8/2/2019 Black Monday Slides
17/17