Black Monday Memories

• Posted by Greg Harmon
• on October 19th, 2015

28 years ago today was Black Friday. The stock market lost 22% that day. Wall Street was cray cray. The story going around was United Airlines having a problem selling a bond as the cause. Remember this was the hey day of the junk bond market. Michael Milken was not running any Think Tank Institute then. He was loading up companies with high yield debt and collecting massive fees. Ivan Boesky was just getting around to sticking the knife in his back.

I was a fresh young punk on the Street at that time. Well close to the Street anyway. I had started at Chase Manhattan Bank in securities lending, or what was then called stock loan. It was a funny name as I spent my day financing US Treasuries via the repo market and investing the proceeds into high grade commercial paper. I did not ever touch a stock. And at that time 2 years out of college with an Engineering degree, did not rally even know what a stock was. But I knew they were crashing.

You see at that point I was basically a credit arbitrage fund manager. It was easy then. On slow days I could repo out $1 billion of Treasuries and use the proceeds to buy A1/P1 commercial paper for a 25 bp spread. On an overnight basis. 98% collateralized trading overnight for 25 basis points is a big deal.

But that changed with Black Monday too. That day spreads between Treasuries and high quality credits blow up, even overnight. We were making 200 basis points and more for a few short days. Still with overnight risk. Out sleepy little business, in the fourth floor of the basement, just above the vault of gold bars, was printing money like the Bernanke.

Expense accounts followed, Mets tickets, and an eventual move up to 410 Park Avenue, where the NFL offices were. Ah the memories. One day that changed a lot of lives. Where were you on Black Monday?

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