The Crash

The nineteenth of October. Remember this day.

Thirty years ago I was sitting in my office, a bearded thirtysomething guy who was omniscient, swaggered in cowboy boots and had a rock-hard body glistening beneath his stylish suit. In short, nothing’s changed. Except the world.

A journalist and daily newspaper columnist at the time, it was my job to explain money and markets to the masses. In the corner of my office was the latest high-tech device, a 400-pound Dow Jones machine which churned out an endless stream of news on four-inch-wide paper (yes, actual paper, like from trees) and dinged in excitement when something important happened.

Well, the bell never stopped. Monday, October 19th, 1987 was an utter disaster around the world and one of the scariest moments in the life of anybody with investments. Stocks crashed, cratered and croaked in the worst sell-off ever seen previously, or since. My office slowly filled with people drawn by the constant dings as the Dow smashed downward through one resistance point after another.

By the close, the index had shed 22.61% of its value. In one day. It was pure nausea. The fear of the next trading session was overwhelming. By Friday everything could be worth zero. At five I sat to write my column and the page one story for the next morning’s editions, laced with hyperbole and drama – spun as only a man who knows everything can spin. I even selected a few pictures of guys on bread lines in 1930s Toronto to illustrate the piece. We were all pooched.

Of course, the world survived. Central banks slashed interest rates the next day. Governments found billions in stabilizing funds. The smart money swooped in like a blizzard of locusts to feed on all those broken and bent equities, and markets eventually roared back. I began to comprehend that when the world ends, it will not be with a bang, but a whimper. A melt, not a crash.

By the way, that one-day 22% dump thirty years ago was twice as bad as the steepest one in 1929. In contrast, the worst hit we took in the 2008-9 credit crisis was a mere 8% stock market slide. My, how we have become a society of wusses.

Well, October 19th may also mark the end of our finance minister. Bill Morneau had one of the worst days of his life on Thursday. First he was forced to appear at another tawdry event in Hicksville, broadcast live and grainy on Facebook, and announce the government is totally abandoning one of the three small-business busters announced in July.

Minister Morneau announced today that the Government will not be moving forward with measures relating to the conversion of income into capital gains. During the consultation period, the Government heard from business owners, including many farmers and fishers that the measures could result in several unintended consequences, such as in respect of taxation upon death and potential challenges with intergenerational transfers of businesses. The Government will work with family businesses, including farming and fishing businesses, to make it more efficient, or less difficult, to hand down their businesses to the next generation.

The T2 government retreat’s been stunning. Almost total. They spent months suggesting the majority of small business owners are tax cheats, loopholers and social parasites systematically ripping off the middle class, in order to push ill-considered plans to penalize working couples, gut the retirement savings of entrepreneurs, piss off doctors who abided by every statute and threaten family farms.

It was the worst political messaging seen in decades. Millions of self-employed were vilified to justify more tax. People who had never broken a single rule were suddenly decapitated in this blog’s comment section by those who swallowed Ottawa’s unbelievable propaganda.

So here we are. Liberal defeat. The feds have reversed course and agreed to the Harper-era small business tax cut to 9%. Retained earnings will not be taxed into dust. Business owners can accumulate up to about a million and invest it for growth, to be taxed at normal levels. The no-capital gains proposal has been shelved. And up next will likely be back-tracking on the income-splitting ban, done in the name of gender parity.

Worse for Mr. Morneau is the shredding of his creds, as detailed here yesterday. So on October 19th, two full years after become minister of finance, he agreed to place assets in a blind trust (as required) and sell off others which had put him in a major conflict of interest. Too little. Much too late. It will be a long time before people forget about the French villa he hid inside a holding company, the fact his family company specializes in tax avoidance for 1%ers, or that he deliberately dodged the Ethics Commissioner with his $43 million in shares while going after yoga studios.

Could have sworn I heard big dings today.