Remembering Black Tuesday

The late 1980s were heady days for sharebrokers; big money, big personalities and big business, shouting and screaming on a trading floor, chalkies scratching up the latest stock quotes, a share trader's livelihood flying from fist to fist on bits of paper.

Two decades on, after the biggest one-day stockmarket crash in history on October 20, 1987, the sharemarket is a different beast; less ego, less flamboyant.

Retired Wellington stockbroker Alfie des Tombe does not think about the old days much, nor that fateful day when the New Zealand sharemarket followed New York's Dow Jones and the rest of the world, starting a slide that lasted four years and wiped three-quarters off the value of the market, bringing 200 companies down with it.

"It was just a correction," he says.

Caught on camera by Dominion photographer Martin Hunter on the day of the crash, Mr des Tombe's fraught expression betrays the real feeling, a contrast to his mild recollection.

But compared with the mayhem on Wall Street, New Zealand had no rash reactions, no suicide attempts, no broken brokers, he says. "The feeling was subdued here, no broker really got upset. We were under reasonable control."

Conversely, it was the rampant, uncontrolled mood of investors that led up to the day. As the market moved from about 600 points to 4000 points in five short years, investors were blinded by the potential profits. They were taking out second and third mortgages and raising cash to invest any way they could.

"There were a lot of people like that in New Zealand, playing the market because it was so good," Mr des Tombe says. "Every day another 20c went on to your stock."

Christchurch investor Robin Shaw knows the feeling, and remembers not liking it. "The market was too high and I had this gut feeling."

Telephoning her son, who was saving for a house deposit at the time, she said it was time to sell everything. "I went in there and sold the lot. We got in before it crashed in Hong Kong. But I was so incensed about getting his ones sold, I forgot about my own."

On Monday night, October 19, the des Tombes were having a dinner party, and "just carried on" as the news filtered through. The next day it was time for some serious reflection.

"I was looking at my clients who were exposed and trying to reassure myself that nobody was really in a bad way."

Mr des Tombe thinks most of his clients got away with minor injuries, but knows a few who did not read the signs, or heed advice to sell in the overinflated market.

"They would turn around and say, 'But the stock is going up and up and up'."

Veteran broker Malcolm Brown, now at ABN Amro Craigs in Wellington, remembers how those who wanted to get out could not.

Investors were starting to get wary when he tried to sell Poseidon shares that had gone from $20 to $240. "I bought 10 shares at $178. They went up to $240 and I tried to sell them. I sold two."

He was stuck with the rest as he watched the stock price plummet, eventually offloading them before they bottomed out at $100. "You just couldn't sell them."

Many New Zealanders had their heads in the clouds, and it took an overseas trip to market New Zealand shares in early 1987 for Mr Brown to realise what was coming.

"The market went up 20 per cent while we were away, but no one would touch (New Zealand shares) I came back and said there is no way this market can keep doing this."

He was driving up a mountain road with his wife when the Dow Jones Industrial Average crashed. "I said to my wife, 'It is all over'."

Looking back, the feverish investing seems farcical, the stocks inflated to extreme proportions. "There were very high inflation rates and there was very easy money. It was a false environment.

"Over time you could see the valuations were stretched and the market was full of speculative money. But when things are going up at that speed you don't know when to jump off. People were buying on emotion and greed rather than anything else," Mr Brown says.

"It was just a nonsense in hindsight." Mrs Shaw says the nonsense was infectious, with friends and neighbours leveraging everything for cash to buy shares.

"They had credit cards, mortgages _ you name it. I got quite worried about the amount of money the banks were lending. You could just go in there and get as much as you like. It just wasn't on."

Forgetting to cash up her own portfolio cost her $50,000, mostly invested in her favourite share, Brierley Investments.

But she does not think much about it, 20 years later. "That is history and you move on." Looking at the market now, which has only just recovered to 1987 levels, she says the message is still the same.

"I always say to people, if you want to go into the sharemarket, you have to be prepared to lose some of it."

- © Fairfax NZ News