Remembrance of Things Past

"A change in the weather is sufficient to recreate the world and ourselves."

—Marcel Proust

This week marks a dubious anniversary for the stock market. It was October 19, 1987, a.k.a., Black Monday, when the Dow gave up 508 points. The Dow dropped 22% of its value in just one afternoon.

The crash came against a backdrop of inflation fears, rising oil prices, Middle East tensions and a lot of other eerily familiar circumstances. Fortunately, safeguards subsequently have been put in place to avoid such a huge one-day decline. Nevertheless, the events of two decades ago remind us all that investing always is a risk.

I do think a big slide over a short time akin to what we saw in 1987 can happen again, and that’s why I am so vigilant when it comes to cautioning investors about the need to always, always, always manage risk. By the way, in case you haven’t heard, you must always, always, always manage risk!

While the Street remembers the events of 20 years ago with deserved fear and anxiety, the Fabian family remembers that time period for a different reason.

In what was to become perhaps the best call in the history of this service, the Fabian Plan generated a sell signal on Thursday, October 15, 1987, which moved subscribers into the safety of the money market (cash). Four days later, it was Black Monday, the single-biggest one-day decline ever.

Fabian followers walked away with gains of 23% in calendar year 1987. The Telephone Switch Newsletter, as our Successful Investing service was called back then, was one of five publications to have predicted the decline as reported by the Wall Street Journal. Of course, we did not predict anything. We simply stuck to our disciplined investment approach and followed the rules of the Fabian Plan.

Sometimes memories are both bitter and sweet.