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SCRATCH ON THE POOL TABLE OF LIFE

Dad and Chicken Little were both right; the trick lay in the timing and this time, they both hit jackpot!

But, in the end, it had little to do with credit cards.  Instead of a payout in a real jackpot, it was more like a “scratch” on the pool table of life.

The underlying explanation of the 1987 crash was the US dollar.  You see, the greenback had been way too strong for way too long during the mid-1980s and had contributed to record trade deficits.  Meaning, foreign goods were cheap, relatively speaking, and the US was buying all it could get its hands on.  On the other hand, sales of American-made products were getting crushed around world due to the super-dollar’s sky-high value in other currencies.

Even I had been in on the game the previous year, loading up on British clothes with the pound at parity to the dollar.

Anyway, too many people chasing too few goods tends to stir inflation.  To tamp that down, the Fed raised the discount rate by 50 basis points in September 1987.  Equity markets really don’t like that.

Nudging the markets ever more off of a cliff, the Reagan administration made some critical misstatements affecting the currency markets.  In response to the financial news on October 14, 1987 that the US trade deficit had hit an all-time high, bond markets tanked and the DJIA dropped more than 150 points, a record drop.

It had been a long bull market since January 1985, more than 2½ years previous.  The DJIA had more than doubled despite naysayers, like my Dad, Bernard Olcott, claiming that market was gonna come tumbling down.

“Credit card debt!” “Credit card debt!” “The sky is falling!” “The market will crash!”

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RUNNING OF THE BULLS

As an MBA business school student in the fall of 1987, in the middle of a raging bull stock market, I was in receipt of a very strong sell signal. In all honesty, I had been for a long time.

Was it from Herby Fischer, my own (and Dad’s) stock broker? (I had a very small account with one holding, Wix, which promptly went down after Herby bought it for me).  No.

Was it from Ira KawallerJimmy Rogers, Jim Freeman, John Whitney or any of the other great business school professors at Columbia Business School? Nope.

How about my pal, Arch Crawford, the famous stock prognosticator who predicted future DJIA index levels by Astrology? Nice try. But wrong.

Ok. Ya think the source could have been someone who had no experience whatsoever in portfolio theory, Elliot wave, or value investing? Someone who never quoted Peter Lynch, Warren Buffet, or even read Alan Abelson’s column in Barron’s?

Yes, it was. None other than the namesake of this blog. My own Dad, Bernard Olcott. Only problem was, he was predicting that the stock market was going to crash. Every. Single. Day. So each evening, I would review the financial news and remark to myself, boy oh boy, that stock market just keeps climbing like gangbusters!

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FALLING SKIES

Last week, I discussed cataclysmic instances of a falling sky.  Once every six billion years or so, you don’t want to be here (on Earth).

In the interest of full disclosure, there are other instances of falling sky which are not quite so universal, but just as terminal on a local basis.  Consider a neighborhood volcano that explodes.  Forget about ancient times like Mt. Vesuvius wiping out Pompeii in 79.  That’s year 79, not 1979.  How about the city of Plymouth, Montserrat in the West Indies (I used to renew trademark registrations here!)?  Founded in the 18th century, it served as the capital of this British Overseas Territory in the Caribbean for over 200 years.  Until it was wiped out by the Soufriere Hills volcano in 1997.  Today Plymouth is a ghost town, population zero.

My favorite “sky is falling” incident is the one that occurred in Peekskill, New York on October 9, 1992.  Earlier that week, a resident of that fair city, 18 year old Michelle Knapp scraped together $300 to buy her first car, a 12 year old used red Chevrolet Malibu.  She must have been excited to drive her prize back home and park it proudly in her driveway.

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Introducing Chevrolet’s 1980 Malibu. 

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CHICKEN LITTLE

Above illustration courtesy of Mabel Hill – http://www.romanceroundtable.com/wp-content/uploads/2009/01/barnesreader07.JPG, Public Domain, https://commons.wikimedia.org/w/index.php?curid=10806723

Chicken Little was annoying for at least two reasons.

For those of you reading this blog from overseas, perhaps you may know this little fluff ball and the associated folk tale as Henny Penny or Chicken Lichen.

By way of review, the story goes like this.  Chicken Little (or Henny Penny) was a chick outside somewhere, probably in New Jersey, when all of a sudden she was hit on the head by a falling acorn.  Her gut reaction was to conclude that the sky was falling and that the king would benefit from a warning of this “fact.”  So, she embarks on an epic journey and persuades all that she encounters that, indeed, the “sky is falling.”  In this way, she is joined by other feathered friends like Ducky Lucky, Cocky Locky, Gander Lander, and so on.

Eventually, the flock encounters a clever fox who listens attentively, and then invites them all to his lair for some refreshments.  This turns out badly as the fox simply latches the door and devours them all.

In some versions, Cocky Locky manages to warn Chicken Little who escapes and lives happily ever after, most likely ending up in an EconoLodge outside Newark.

But I digress.

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BOUNCE!

Photo above by U.S. Department of Housing and Urban Development Office of Policy Development and Research – Creating Defensible Space, Public Domain, https://commons.wikimedia.org/w/index.php?curid=803832

To all creatures great and small, anything, and everything, the solution to all of mankind’s issues, questions, traumas, and broken sump pumps was simply “August the 18th (1986).” Up to that date, work had been a long, worrisome slog at Olcott International with CEO Bernard Olcott.

Not only CEO, but also inventor of an entire industry!

Not only CEO, but my Dad who had brought me to the world’s most interesting places!

Not only CEO, but a real employer and engine of economic growth. A killer business! The embodiment of the great promise of small family owned enterprises in the USA!!

Yet an unparalleled brilliance without core beliefs — impossible to follow without getting whipsawed. Even in his personal life. Especially there! A lone eagle who had displayed lots of evidence that he was unwilling to work with anybody.

Someone increasingly distracted by side ventures to the detriment of that main engine of economic growth.  A quick and impatient mind more content to re-shuffle the deck than to manage, guide, dispense real wisdom, and evolve.

A guy who even returned condoms to the Shop Rite Pharmacy because they were too small or “made for midgets.”

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DATE OF RECORD

In the run up to August 18th, 1986, the date of record for me, a typical training session that summer with my replacement Paul Campo went down something like this:

“OK, Paul, this is the computer inventory of all trademarks owned by The Wellcome Foundation.”  I put my hand down softly on a large green binder by my side.  Inside were hundreds of pages of green tractor-feed paper held together with white plastic paper ties.

Getting very little on the way of a reaction, I flipped through the pages making a ruffling noise.  “You see, the marks are organized by country.”

Again, no reaction.

Continuing to flip through the sheets, I stopped at one page.  “Here, this page is for Sudan.”

Paul looked lively all of a sudden.  “Dan who?” he asked.  “And I don’t know anyone named Sue,” he added.  A real comedian.

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THE LIZARD

Monday, August 18th, year of Our Lord 1986.  That was to be my first day at Columbia Business School’s two week orientation for the incoming class of 1988.  As mentioned last week in “MURPHY AND HIS LAW,” it was to feature a boot camp for Mathematics and gettin’ jiggy with the Hewlett Packard 12c financial calculator.  Although that was the date of reference for me throughout the second quarter of the year – after I was notified of my acceptance in April – I suppose from my point of view the real date of reference for me was Friday, August 15th.  That was to be my last date at Olcott International.

I told Dad over lunch of my acceptance at Columbia.  He took the news quietly.  Why shouldn’t he?  After all, he had asked me to leave the company that past December.  We both agreed that it was important to find a replacement for me to insure a smooth transition.

For this task, Dad avoided placing a Help Wanted ad in the Hudson Dispatch or Bergen Record newspapers, his usual sources for potential office talent.  This time, he went to the Job Placement office of the US Trademark Association and found someone who, like Bob Gerhardt, had his favorite qualification – an actual Juris Doctor degree!  (Something I never had nor lusted after).