Another crash in the offing? FT runs this chart that puts 2017 rally into 1929 and 1987 Oct crash perspective.

Asked if there are modern equivalents to portfolio insurance, Mr Grantham says: “Yes there are, but they are better worked out, more polished and the people who use them better understand them. Anything is possible, but the market is probably more resilient to modern equity hedging than it was to that crude rapidly expanding portfolio insurance in 1987. You could hear it creaking.” The issue that concerns Mark Lapolla, who was at Goldman Sachs 30 years ago and now runs Sixth Man Research, is that all risk-management tools are based ultimately on the same group of assumptions — modern portfolio theory, the capital asset pricing model, the Black-Litterman approach and so on. “?.?.?.?What happens when the risk environment changes and all strategists suggest making the same movement? It syncopates — and they’d trade ETFs to do it. That’s the way that’s easiest for people to execute. So we have portfolio insurance through portfolio management, using ETFs.” Another key change is that exchanges are no longer a series of protected monopolies. Trading carries on in numerous venues, and that could be a problem.

Laszlo Birinyi, founder of Birinyi Associates and a veteran of Salomon, says Black Monday was “gut-wrenching” but at least it was possible to discern what was going on. “Now, with so many trading venues, and with much greater speed, that is no longer possible.’’

Revisit the Crash of ’87 w/ stories from the Wall Street players who lived it

On Wall Street, when things decline, you tend to remember. When things decline a lot, you remember the date. Oct. 19, 1987, is one such example. The biggest single-day stock market collapse in history—a 23 percent drop—rendered once-trusted ideas useless and redefined the financial landscape for market professionals.

One of them was a rising Salomon Brothers bond salesman named Michael Lewis, who had yet to pen Liar’s Poker. “The markets in a panic are like a country during a coup, and seen in retrospect that is how they were that day,” he would later write of the chaos he witnessed. “One small group of people with its old, established way of looking at the world is hustled from its seat of power.”

Black Monday, as the day became known, is part of financial history’s fossil record, a divide between old and new markets. It was the first significant instance of computer-driven trading run amok. The nascent equity options market saw assumptions based on the Black-Scholes model overturned and replaced by a more complex world of volatility skews. And Federal Reserve Chairman Alan Greenspan, just two months on the job, got to glimpse a market panic and sell his first “­Greenspan Put” under the U.S. equity market….


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