On the anniversary of Black Monday, former AXA Framlington chief executive Robert Kyprianou (pictured), recollects what it was like
1. What job were you doing at the time of the 1987 Crash?
I was a rookie fixed income fund manager having just made the switch from economist/ strategist. I had joined Citibank Investment Management’s institutional business a few weeks before.
In that month they moved into what, with hindsight, turned out to be a classic top of the market, brand new, purpose built trophy building – the Cottons Centre on the south bank between London Bridge and Tower Bridge.
In another top of the market signal, Citibank had plans to convert the old Billingsgate fish market building directly opposite on the north bank of the river into the largest trading floor in Europe, connected to the Cottons Centre by an underground tunnel. The warning signs were there!
2. What do you remember from the day?
Black Monday had its pre-shock tremors the previous week with sharp declines in stocks as war bubbled up in the Gulf. And then in London came the hurricane Friday morning. I made it into work that Friday to find only a few colleagues making tea and comparing stories while most of the office lights were out – ‘Black’ was certainly an appropriate prefix for that Friday.
With equity markets spooked and missiles flying around the Middle East, the hurricane only added to a mood of uncertainty, gloom and worry - but not doom; that was to come!
In our household and probably in many others, the weekend past in a mood of something close to fatalistic foreboding as the news services gorged themselves on a natural disaster in London, a looming war in the Middle East and financial market panic.
Monday came and more made it into the office and more hurricane stories were exchanged. As a fixed income manager, we had largely been a bystander to the equity market shake out the previous week.
Equity markets in the Far East and in Europe that morning in London were falling but this just felt like catch-up for events the previous week. We had no sense of the scale of what was to come.
I recall the mood that morning in the fixed income department and in the fixed income markets was relatively calm – little action in either. Both were waiting for the US equity market and, more importantly for us, US bond futures in Chicago to open.
It seemed that everyone in fixed income was waiting for a lead from somewhere and Chicago futures was the designated party.
As the hour approached for Chicago futures to open trading the seats around the dealing desk filled out and soon there was standing room only. Eyes were on the 30 year long bond future, the daddy of the bond futures – finally it opened and the lights lit up on the screens.
In the days when a point up or down in the long bond was a memorable day, the US 30 year future rose by 10 points in half an hour! Completely unprecedented. As the rookie I took the lead from my elders, especially the worldly-wise old lags on the dealing desk.
They just stared at screens, uttering almost under their breadths the odd expletive. I don’t even recall any calls coming in to the desk from brokers – it seemed that the frozen, silent screen staring taking place in our dealing room was being repeated across the fixed income community throughout the City.
Occasionally in that opening half an hour a fund manager might ask whether we should sell or buy something only to be met by a glare from the senior dealers which could clearly be interpreted as ‘don’t be stupid lad’. So we just watched not knowing how far it could go up – 5, 6, 7 surely not 8 points! And up it kept going.
Prices for bonds may have been going up very sharply but I can tell you there was no euphoria around our desks that day. Bond yields prior to Black Monday had been heading up for a while and many in the market were light on bonds relative to their benchmarks or just outright short come that Monday morning.
A few had covered in the UK futures that morning but many hadn’t, waiting to take their lead from US futures.
Also if you see markets rallying strongly or falling sharply in a very short period of time there is an inevitable feeling of anxiety - ‘shouldn’t we be doing something? Won’t we be missing an opportunity (to join the rally or sell into it)?’ ‘When do I take profits as surely this is going to correct?’ or ‘when do I cover my losses or is it too late to do so?’ It struck me that there was a lot of stress and frowning on our floor that day but little action.
When I left for home that day US equities were still falling – more of the same from last week I thought.
In those days there was not 24 hour news coverage available through your TV at home, and no mobiles with apps to keep you fully informed minute by minute.
You waited for the scheduled news programmes on the few TV channels available back then, something like the first at 6pm followed by 7pm, 9pm and 10pm. I recall that each time the news came on the US was down another 100 points – back when a 100 points was roughly equivalent to 5%.
I was in shock – I remember calling friends in what was turning into an improvised self-help group.
With each scheduled news programme the conversations turned from ‘what the hell is going on, can this really be happening’, to ‘will there be jobs in the morning’.
A baptism of fire for me most certainly – survivable? That week I wasn’t at all sure.
3. What impact if any did the 1987 crash have on you/your career?
As the young new kid who only just started at the firm I thought my career as a fixed income fund manager had ended before it had even got properly going.
At home the conversation over the dinner table was what I would do if the seemingly inevitable happened. Calls from my friends around the City only added to that sense of foreboding.
Fortunately I was in the institutional business where clients took their time to make decisions. I do not recall that we suffered many account closures or panic calls for liquidations in our fixed income mandates.
I spent the rest of the following weeks observing – the behaviour of my colleagues, our clients and the markets. I certainly was not in a position to make brave calls or give strong assurances, but I am convinced that what I witnessed made me a much better portfolio manager.
I had seen markets at the extreme, seen what they could do to portfolios, seen how people reacted, good and bad, and this gave me a different perception of risk, volatility and opportunity which would stand me in good stead in later years when other shocks created sharp market movements.
It taught me that the best attribute in the face of shocks and events which seemingly cry out for an immediate response is calmness.
Finally, it taught me that when things are seemingly going badly, remember – they are not that bad.