The Wall Street Whiz Kid Was Born 30 Years Ago Today
For me, it’s truly hard to imagine that 30 years ago, a young stockbroker with one of the most unlikely paths to Wall Street, would actually prosper from a day that would forever be known as “Black Monday”.
I shared in my book how such a day would create serious national attention for me, along with me becoming a “legend in his own mind” (who also was turning the “Ten Commandments” into the “Ten Suggestions” at the same time).
“In August of 1987, in the midst of all the media attention I was drawing, things in the market made me very uneasy. Based on my “long-standing” history of three whole years in the business, I believed that the market was set up for a big crash. The thing about that was it was pure instinct. A sophisticated guess. Following my gut. There was no technical analyzing that went into it, no fundamental examination. Just Peter thinking, hmmm, something doesn’t feel right here. Bear in mind that I didn’t have the experience or the intelligence to have concluded this. But I did. So, I advised all of my clients to sell. Everything. Get out of the market. In hindsight, I now know this was the second time I felt the hand of God in my life. It was He who gave me that insight because I sure as heck couldn’t have come up with that on my own.
Note that I told them the market “will” crash. Not that it “might,” “could,” or “should.” In this business you never use unconditional words like it “will.” You always cover your butt with a long legal disclaimer or you dance around the facts with less precise phrases like “the markets show weakness and may dip” or “the market is poised to fall sharply.”
But I used the word “will.”
After issuing my forecast I was called up to the boss’s office post haste and given two options: either retract my forecast or resign.
I was interested in neither. When I asked why, his explanation was succinct and very matter-of-fact. He explained that, “Ninety percent of all people will never sell everything. Though they might sell some holdings they’ll hang on to a few that are their favorites for some reason or another.”
“If you’re wrong, they’ll never listen to you again. And if you’re right and this terrible thing happens, they aren’t going to be able to profit from you because they’ve already lost a lot of money,” he explained. “Look at the 10 percent who do listen to you: half will be too afraid to step back in when you tell them to, so the net effect is that only 5 percent will profit from this advice.”
Then he said something I have never forgotten, “On Wall Street, no firm can survive with only 5 percent of its clients profiting.”
From a strictly sales point of view, I guess he was right. But I never looked at it that way. I just assumed that you should do the right thing and tell people the way you see it. He thought more about the bottom line.
I didn’t retract my statement. I didn’t resign. And, somehow, I didn’t get fired. I stuck to my prediction.
It’s important to note here that what truly separated me from the pack of prognosticators on Wall Street was not necessarily that I said there was going to be a crash. There were a few other people who waved the caution flag, though I don’t remember anyone else saying it with such conviction. What made my call different was the fact that my employer was demanding a retraction, and I wouldn’t budge. That was a very unpopular move on my part.
On August 25, just eleven days after my doomsday prediction, the Dow Jones Industrial Average (DJIA) had risen seventy-five points, which was a big move at that time. I became the laughingstock of the firm. Other brokers would call to tell me that Kmart was hiring and I should go apply, or they just left voicemails asking what I was going to do for my next career.
PAW had several office locations, and one day I got an interoffice delivery—a package that stank to high heaven. It was a box full of “doggie doo” and a note saying “This is what I think of your forecast.” Naturally, the note was unsigned and we never figured out which of my supportive colleagues sent it. I always wondered how the poor messenger put up with driving a box of dog poop from office to office.
I just put up with it and stuck to my guns.
In mid-September, to the surprise of most on Wall Street, the markets started to show signs of faltering. Then, on October 19, 1987, “Black Monday” hit and the DJIA dropped 508 points to 1739. It was the largest one-day decline in recorded stock market history at the time.
If you weren’t in the market back then or are too young to recall, you may not realize the severity of this crash. This was big. Huge. It was being compared to the crash in the 1920s when brokers literally took their own lives by jumping out of windows. The fear was the economy would sink and unemployment would become severe.
On October 20, the day after the colossal beating on Wall Street, I put out what became my second “famous” prediction: I stated that the market would be at a new all-time high within two years. Nobody could picture it. The devastation was too colossal. They all thought I was nuts. In the depths of the despair and depression and recession on Wall Street, they just couldn’t imagine that we’d rebound in less than twenty-four months. Remember, the 1920s crash sparked the Great Depression and years of financial and human suffering in the U.S.
But, hard as it was to imagine, out of the doom of that Black Monday crash the markets went to incredible heights within the next two years, proving my call spot on. Thus, my second famous prediction. Note that there was no way I was “qualified” to make this call, either. That’s how I know it was God. At my level of ability and knowledge dumb luck would allow me to get one of those predictions correct. But to get both of them right? Yup, it was God. Had I not made those two calls I would never have the notoriety I have today.
A reporter named Steve Crowley who did business reporting on ABC’s nationally televised morning show Good Morning America picked up on my forecasts and ended up doing a segment on me. Because of my foresight, my youth—I was just thirty-one years old when most investment strategists on the Street were gray-haired old men—and the fact that my only “education” was the school of hard knocks, he dubbed me “The Wall Street Whiz Kid”—a nickname that has followed me, for better or for worse, ever since.
Needless to say, that interview and the resulting publicity really escalated my career, resulting in more media appearances, more clients, and more money I couldn’t have been happier. And, of course, the media buzz continued to spread like a virus in a room full of runny-nosed preschoolers. About a year later I was asked to appear on what was then the hottest and most highly charged TV show at the time, The Morton Downey, Jr. Show.”