November 2 1987


November 2 1987



For the brokers who trade on the world ’s stock markets, last week’s unprecedented crash meant a nightmarish struggle to salvage whatever they could of their clients’—and their own—fortunes. One such broker was David Doritty, 30, who for the past seven years has worked for Nesbitt Thomson Deacon Inc. in Toronto. Like the hundreds of other stockbrokers across the country, Doritty is the middleman between the exchanges and the public. He is paid a commission to buy and sell stock, but it is also his job to interpret the unpredictable markets for clients whose investments ride on his judgment. During last week ’s frenzied trading, Doritty spent most of his time hunched over his cluttered desk, a telephone pressed to his ear, soothing and calming 350 alternately frightened and exuberant clients. Maclean’s Contributing Editor Ann Shortell joined him as he tried to fight a rearguard action against the economic and psychological forces that the dramatic share-price plunge unleashed. Her report:

Monday: Doritty was at least partly prepared for what was about to unfold. He had become increasingly apprehensive about the stock market ever since it started its slow descent in August.

On Thursday, Oct. 15, he made up his mind to sell part of a $50,000 stock portfolio under his control, and he recommended to his clients that they do the same. They had a lot riding on his advice: some had invested $200,000 in the market and others, sophisticated long-term investors, held up to $2 million in stocks. But he moved too late. He was still unloading some of his own stock in the midst of Monday’s sudden crash, and he watched helplessly as his profits evaporated.

After the markets closed at 4 p.m., a tired and hungry Doritty ate a sandwich at his desk and then started telephoning his clients. Over and over again he broke the terrible news: their losses had been staggering. “You have to talk to everyone in this market,” said Doritty. “It is very hard to phone someone and tell them you’ve lost their money.”

When he finished work at 7:45 he walked past local bars overflowing with shell-shocked stockbrokers. But Doritty did not join them. Instead he “worked off steam” playing a game of squash. Later that evening, at his midtown Toronto home, he tried to relax over a beer while watching the financial news on television.

Tuesday: The telephone was ringing when Doritty arrived at Nesbitt at 8:15 a.m., after a sleepless night. During the day he fielded about 200 calls, six times his normal load. “They want to know how I’m feeling, because that may dictate how they’re going to feel,” he said. By 2:10 p.m., the U.S. markets appeared to be rallying, and Doritty was more optimistic. He urged his clients to sit tight and told one nervous caller that, while the Toronto market was falling, “we’ve got to keep our heads up and keep smiling somehow. We’ve had a rally in New York, which is good.”

But as the impact of the share-price collapse became clearer, a sense of urgency spread through Nesbitt’s brokerage office. Doritty said that his 40 colleagues at Nesbitt earn an average commission income of $75,000, and onethird of them have been in the business for less than three years. He predicted that salaries would be cut in half next year and there would be empty desks in the office. But Doritty, who joined Nesbitt in May, 1980, said that he plans to be among the survivors.

As the hours passed, Doritty became increasingly frustrated by the firm’s overloaded computer system, which, as

the day advanced, could not keep up with the volume of orders. By 3 p.m. the computer system was so clogged with orders that Doritty was unable to tell his clients whether anyone had bought their stocks.

In the end, he advised his clients to “just hang onto your cash and bear in mind that I’m not a buyer in there today.” He cautioned one client: “I’m just trying to hold the line. Believe me, when it looks like there’s money to be made, I will contact you.” Doritty had already placed 30 sell orders when a veteran investor phoned to place a buy order. He bluntly told his risk-taking customer, “Toronto is still getting decimated, the stocks have been cut in half.” But just before the market closed, he bought some blue-chip stocks— including Rogers Communications Inc. and Alcan Aluminium Ltd.— for himself and some of his more experienced clients.

That evening Doritty joined other brokers for a beer, then returned home, where he told his wife: “I feel like I’m being punched out. I’m in the eighth round and I’m probably going to go down for the count any minute.”

Wednesday: After a second restless night,

Doritty arrived at work early to make sure that his sell orders for the stock purchases that he made late Tuesday were ready to move. And when the market immediately opened higher than it had closed, he and his clients made an average of 15 cents on the dollar. Doritty said that he expected the bellwether Dow Jones composite index in New York to rise 100 points during the day. But he continued to warn his clients against playing the markets. “I have had a lot of calls this morning from little guys that want to buy stock,” said Doritty. “I am amazed. The little guy could get sucked into this market very easily.”

But the “little guys” did not listen, and before trading had even begun his order tray was full of blue buy orders. The Dow, which started the day four percentage points above its Tuesday close, quickly jumped another 27 points. But Doritty still waved his clients off, telling one caller, “If you want to be part

of the herd again, that is fine, but I would not be.”

But as the pressure continued, Doritty admitted that he wondered whether he was losing his perspective. “I’ve got to get myself focused here,” he said. “I wish I had more time to think. I just sit here writing orders all day— that is the problem.” By afternoon, the harried broker said that he was so “terrified” by the rush of buying that

he decided to refuse all buy orders.

Thursday: After a good night’s sleep, Doritty was ready for another frantic day. At 9 a.m. brokers huddled to discuss the previous day’s rush to buy shares. It was a big change from the broker’s usual routine of having to convince investors to make a purchase. Laughed one broker: “I probably did more unsolicited buys yesterday than I’ve ever seen.” But his manager quickly warned him that they could not have investors backing out of purchases as the market fell, leaving bad debts with Nesbitt. “Just make sure you’ve got their cash. No cheques,” he said.

The sellers were the smart ones, Doritty said. “There are a lot of little guys who may perceive this as a way to make a fast buck on the way back up. The guys

on the floor, the professionals, know that this is just an opportunity for them to sell their positions. So the profession is selling it to the public.” Still, the professionals had not unloaded enough to make them happy; a broker called Doritty from New York and told him the mood on the floor of the exchange as it opened Thursday was “suicidal.” Throughout the day, sellers outnumbered buyers. Said Doritty: “All of a sudden people have gone from thinking, ‘Hey, this is a great opportunity,’ to, ‘Hey, maybe there really is something wrong.’ ”

Friday: The market began to fall as soon as it opened at 9:30 a.m. Doritty told a client that in the weeks to come there may be ups and downs, but “we’ll see new lows before this is over.” And he said he was worried that the small investors would panic when this happened: “The little guy who bought into the market Wednesday will probably sell as the market makes new lows.” For its part, Nesbitt lost money during the week. Doritty said that besides Nesbitt’s own trading losses, for every dollar it earned in commission income it was down one dollar on such extra costs as overtime and anticipated bad debts.

As the day came to a close, the calls from investors tapered off. “A lot of people are afraid to call,” Doritty said. “They don’t really want to face up to it. They would rather hide and forget.” But Doritty did not allow himself to avoid hard facts. He said that he was thinking about the slow months that may lie ahead. When the market closed at 2 p.m.—214 hours early, to give brokers a chance to get caught up with the backlog of record-keeping—he headed for his cottage near the village of Singhampton, 100 km northwest of Toronto. On his way out, he joked, “It is a nice little town—where I may live forever after this.” But then he quickly made it clear that he does not really plan to leave the business, because, he said, there will be another bull market. It could take six months, or it could take two years. “But when we get to the 14th and 15th rounds,” said the determined Doritty, “I am going to rally and win this thing.”£>