Failure, Crashes, and Meltdowns Fascinate Me

Black Monday (October 19, 1987)

https://omni.wikiwand.com/en/articles/Black_Monday_(1987)

I was scrolling the day chart back in time while I was reading this, to 1987. I looked at the scale of the drops (there wasn't even a gap, unlike 8/5/24), as I imagine anxious people calling their brokers to place sell orders as they were panicking.

I was reading about bear markets and crashes because I was panicking about when and if the long red candles would pop up, confirming my fear that it was just a bounce (selloff rally).

The black monday was special. Everything, EVERYTHING was going well before the monster drop and the insane selling pressure on that day, just because people think the price was too high and a correction was due.

I imagine people stuck in mutual funds that only trade once a day after close, with freshly-calculated NAVs that are deeply in red. Portfolio insurance that were designed to protect / hedge adding to the selling.

It was before the market-wide circuit breakers (MWCBs, at 3 levels: S&P 500 -7%, -13% and -20%) were introduced, and there wasn't emergency plans or trading halt. 20% drop was big, but I was surprised that it didn't drop further. I could sense the fear when reading the article. Orders got piled up because computers were overwhelmed (That was almost 40 years ago), I guess that acted as a natural rate limiter or a trading curb.

El AL Flight 1862 (Boeing, 1992, Nederland)

https://www.google.com/search?q=el+al+1862

Damn. 2 engines fell off. This time it was Boeing, not DC.

Lion Air Flight 610 (Boeing, 2018, Indonesia)

All life were lost, again. Also caused grounding of 737 MAX costing $20B. A pension fund actually filed a class action lawsuit against $BA because "their failure to make sure safety" caused stock price to drop (so less pension). Besides lawsuits, $BA also had to pay for settlements (but I don't think it's nearly enough).

https://omni.wikiwand.com/en/articles/Financial_impact_of_the_Boeing_737_MAX_groundings#Stock_analysis

Stock didn't drop much on that day, but $BA wasn't doing well in the past 5Y. Credit ratings and stock ratings dropped. $BA got a \17B fund from government during COVID relief because it was "too big to fall". Well, I think many people are sick of it and they're waiting for another company to replace it.

BP Oil Spill

$BP had to pay a much larger fine and settlements for decades to come, see Large Gap Down for more.

It's fun seeing Fitch downgrading $BA, making it's life harder, and $BP had to pay fines size of its market cap, making it no longer the 2nd largest oil company in the world.

Crashes with Swift Recoveries

• Fast recovery:
  • 2020 COVID "Black Monday" I & II
  • 2024 8/5/24 (Gray Monday)
• Bear markets:
  • For 2008, I only had memory of watching the Olympics on TV, and Obama's speech
  • For those who do not look at the charts, they might not know that 2022 was a struggling year for many traders (I can imagine it was hard for many Bogleheads too, seeing their money shrinking every month they auto-invest % of their limited salary).

2022 was fascinating. I mean, the market. Bogleheads and the bulls were betting their money aginst the market trend, telling themselves that they were buying dips. Yes those were dips but you'd need a long investment horizon to consider them dips. It was never fun to see your money gone, don't know when it'll come back (Bogleheads) or if it'll come back (contrarian traders).

Open your chart, see $SPY making lower lows all-year. So many bounces, but you did not know if it'd be the end of the bear market. Every bounce got smashed down, hard, with large gap and long red candles. The bears were winning. To quote from a redditor, "plus, it's fun riding them, since the red candles are fast and violent", just like falling to gravity.

During the 8/1-8/5 free-fall this year, I wasn't worried until 8/5. In fact, 8/1 (Thursday)'s long red candle made a lower high, and it was pretty impressive if you're on the long side, if you ignore the color. 8/2 was extremely clear about where we were headed (to the ground) with the moderate gap down. But it has a long tail! That was the buying showing their muscles, I told myself. I'd find excuses to avoid taking immediate loss, which also cost me big potential gains. "Only if I sold everything and started shorting SPY and even NVDA, with just a starter position."

The 3-day free-fall was recovered fast, we gained 8%+ since the low on 8/5, grinding our way to 8/1's high on 8/16. On 8/15, news came in saying this could be a good time to buy. News are all garbage! They're either wrong or lagging. Today we broke through mixed housing data and resistance from previous relative high. I'd say the recovery was quite impressive.