Friday the 13th mini-crash

The Friday the 13th mini-crash was a stock market crash that occurred on Friday, October 13, 1989. The crash - referred to by some as "Black Friday" - was apparently caused by a reaction to a news story of the breakdown of a $6.75 billion leveraged buyout deal for UAL Corporation, the parent company of United Airlines. When the UAL deal fell through, it helped trigger the collapse of the junk bond market. The deal unraveled because the Association of Flight Attendants pulled out of the deal when management, in negotiations over an Employee Stock Ownership Plan (ESOP) designed to fund the leveraged buyout, refused to agree to terms.^[1]

The close

Moments after the UAL deal fell through, the indices began their plunge. By the time the closing bell rang, the Dow Jones Industrial Average was down 190.58 points, or 6.91 percent, to 2,569.26. The NASDAQ Composite shed 14.90 points, or 3.09 percent, to 467.30, and the S&P 500 Index fell 21.74 points, or 6.12 percent, to 333.65. The Dow Jones Transportation Average fell 78.05 (5.26%) on the 13th, and fell another 102.04 (7.26%) on the 16th for a total decline of 12.13%. The major indices had closed at all-time highs as recently as Monday, October 9.

Survey

Many investors were left stunned. Since most market participants blame the UAL deal as the culprit, survey researcher William Feltus and Robert Shiller, the author of Irrational Exuberance, conducted a telephone survey of 101 market professionals in the business days following the crash asking if they had heard about the UAL news before or after the crash; 36% surveyed said they heard about it before the losses set in, and 53% said afterwards.

The market professionals also believed that the UAL story was just an attention grabber, with traders just trying to find a reason to sell. Fifty percent believed that was the reason while 30 percent believed the news would reduce future takeovers.^[2]

Aftermath

The crash is often pinpointed as the start of the early 1990s recession, although it is considered that the surprisingly low growth rates (almost zero percent) during the summer months and the savings and loan crisis earlier in the year had triggered the crisis almost concurrently with the mini-crash, which in turn got blamed by the public (with the memory of the 1987 crash still fresh) as the true culprit of the depression. As a result, stock markets entered a bear market period which lasted until 1995, when the economy began to recover and the dot-com bubble surged.

References

↑ Borer, David A. (1995). "Doing Battle: Flight Attendant Labor Relations in '90s". In Darryl Jenkins ed. Handbook of Airline Economics. Aviation Week Grp., Div. of McGraw-Hill. pp. 563–566. ISBN 0-07-607087-5.
↑ Harvard International Review - Exuberant Reporting Media and Misinformation in the Markets

Stock market crashes

17th century	Kipper und Wipper period Tulip mania Bubble

18th century	The Mississippi Bubble South Sea Bubble of 1720 Panic of 1792 Panic of 1796–97

19th century	Panic of 1819 Panic of 1825 Panic of 1837 Panic of 1847 Panic of 1857 Black Friday (1869) Panic of 1873 Paris Bourse crash of 1882 Panic of 1884 Encilhamento Panic of 1893 Panic of 1896

20th century	Panic of 1901 Panic of 1907 Depression of 1920–21 Wall Street Crash of 1929 Recession of 1937–38 1971 Brazilian markets crash 1973–74 stock market crash Souk Al-Manakh stock market crash (1982) Japanese asset price bubble (1986–1991) Black Monday (1987) Rio de Janeiro Stock Exchange collapse Friday the 13th mini-crash (1989) Dot-com bubble (1995–2000) 1997 Asian financial crisis October 27, 1997, mini-crash 1998 Russian financial crisis

21st century	Economic effects arising from the September 11 attacks (2001) Stock market downturn of 2002 Chinese stock bubble of 2007 United States bear market of 2007–09 Financial crisis of 2007–08 Dubai debt standstill European debt crisis 2010 Flash Crash August 2011 stock markets fall 2011 Bangladesh share market scam 2015 Chinese stock market crash

See also: List of stock market crashes and bear markets

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