Henry Kaufman - The Day the Markets Roared: How a 1982 Forecast Sparked a Global Bull Market

Also by Henry Kaufman

Interest Rates, the Markets, and the New Financial World

On Money and Markets: A Wall Street Memoir

The Road to Financial Reformation:

Warnings, Consequences, Reforms

Tectonic Shifts in Financial Markets:

People, Policies, and Institutions

The Day

the Markets

Roared

HOW A 1982 FORECAST

SPARKED A GLOBAL

BULL MARKET

HENRY KAUFMAN

with David B. Sicilia

The events, locations, and conversations in this book, while true, are recreated from the authors memory. However, the essence of the story, and the feelings and emotions evoked, are intended to be accurate representations.

The Day the Markets Roared copyright 2021 by Henry Kaufman

All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission of the publisher, except in the case of brief quotations embodied in critical articles or reviews.

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First E-Book Edition: April 2021

Library of Congress Cataloging-in-Publication Data:

Names: Kaufman, Henry, author. | Sicilia, David B., author.

Title: The day the markets roared : how a 1982 forecast sparked a global bull market / Henry Kaufman, with David B. Sicilia.

Description: Dallas, TX : Matt Holt Books, [2021] | Includes bibliographical references and index. | Summary: This book tells the story of a record day on Wall Street in mid-1982, the only time in post-war history when a private individual caused a bull market of such magnitude, exploring the global press reaction that followed, the backstory of Henry Kaufmans influence, and the lessons of that episode for todayProvided by publisher.

Identifiers: LCCN 2020045344 (print) | LCCN 2020045345 (ebook) | ISBN 9781953295088 (hardback) | ISBN 9781953295200 (ebook)

Subjects: LCSH: Great Bull Market, 1982-1999. | Stock exchanges--United States--History--20th century. | Bull markets--United States--History--20th century. | Finance--Forecasting--History--20th century. | Capital market--History--20th century.

Classification: LCC HG4910 .K38 2021 (print) | LCC HG4910 (ebook) | DDC 332.64/27309048dc23

LC record available at https://lccn.loc.gov/2020045344

LC ebook record available at https://lccn.loc.gov/2020045345

Special discounts for bulk sales are available. Please contact bulkorders@benbellabooks.com.

To the memory of

William R. Billy Salomon

The genesis of this book occurred when Helen Katcher, my long-time assistant, walked into my office to tell me we were running out of filing space and she needed my help pruning some of the records we had accumulated over several decades. These records included a four-foot-wide set of large black leather-bound scrapbooks. Each thick album contained copies of my press interviews with US and foreign newspaper and magazine journalists, along with my shorter articles and editorials, printouts of television and radio interviews, and clippings of press reports that had quoted me over the years. During my years at Salomon Brothers (19621988), the companys public relations firm had collected and forwarded these materials to Ms. Katcher, who assembled them in the books. After I left Salomon, she continued to collect materials in the black volumes. There is one volume for each year.

Except for 1982, which took up two volumes. In fact, one of the two 1982 volumes is filled with press reports and other print media from a just a few days in the middle of August 1982the subject of this book.

I had devoted a few paragraphs in one of my earlier books, On Money and Markets (2000), to my role in causing that bull market. Now, skimming through the 1982 volumes, it seemed I had given the topicwhich business and economic historians have since portrayed as a milestone in financial historyshort shrift.

I called David Sicilia, my editor for three of my previous books, to explore the idea of a book about August 17, 1982. He agreed that a narrative about a record-breaking day on Wall Street would make for a great story, but as a financial historian, he reminded me that readers also would need to understand the years-long backdrop to that historic day, as well as its aftermath, to fully grasp its causes and significance. What he was really telling me, I realized, was that the story of the day the markets roared (a title that came to me simultaneously with the book idea itself) needed to be situated in historical context. It was clear to me that to bring this book to fruition, I should write it in collaboration with David. And, indeed, his strong academic background as an associate professor of business, economic, and financial history at the University of Maryland proved to be extremely helpful in putting the events of mid-August 1982 in a proper perspective.

For the support she has given throughout my career, including her gracious assistance with this book and all my previous ones, I will be forever grateful to Helen Katcher. I also want to thank Peter Rup, a colleague of long standing, for supplying some of the statistical information for this book; Leah Spiro, my indefatigable book agent; and Matt Holt and his terrific team of editors and designers at Matt Holt Books for their fine work and commitment to the project.

Henry Kaufman

Franklin Lakes,

New Jersey

This book is about a record day on Wall StreetAugust 17, 1982. On that day, the stock market posted one of its largest single-day gains of the postWorld War II period, and bond markets also rallied sharply. Interest rates were the drivernot in how they changed on that day, but in what I predicted about their long-term (secular) trend.

What happened on that single day was unique and a long time in the making. It was unique because it was the only time since the days of J. Pierpont Morgan when a forecast or any other action by a private individual caused a record-setting single-day rally (see chapter eight). It was a long time in the making because my reputation as an interest rate guru, Salomon Brothers position as the worlds leading bond trader, and the postwar growth of the United States as a financial powerhouse all unfolded over decades. Accordingly, after describing what happened that fateful day (and its immediate aftermath) in the summer of 1982, this book looks back two decades to uncover the deep origins of the day the markets roared.

On record stock- or bond-trading days on the New York Stock Exchange, the Chicago Board of Trade, or elsewhere, no bell sounds on the floor to announce the achievement. Nor do the chair of the US Federal Reserve, the chair of the presidents Council of Economic Advisers, or the US secretary of the Treasury announce such benchmarks. Nevertheless, financial market participants and many others throughout the wider economy are keenly interested to know the direction of the market, and record days often signal unique and important developments.