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Terror Attack in London

Posted By Barry Ritholtz On July 7, 2005 @ 7:01 am In Investing,Psychology | Comments Disabled

We can assume the events in London this morning were Terror attacks:

The explosions in a London subway as well as on three double-decker buses were said to be simultaneous, and came during the morning rush hour — the same time as the 9/11 attacks (Note that the Madrid Bombings [1] were during the morning rush hour). According to a "senior Israeli official," the  British police told the Israeli Embassy in London minutes before the explosions that they had received warnings of possible terror attacks in the city. Add to that these events came the day after London won the host role for the 2012 Olympics, and the conclusion that this was a terror attack is hard to avoid. (There are no coincidences).

With the Dow Futures down over 200 points, take a deep breathe and relax. Its still very early in this event, and the details of damage, injuries and fatalities are yet to be determined.

The loss of life is tragic, but giving in to fear — the primary weapon of terrorists — plays directly into their warped pathology.

So don’t.

As we have discussed before, these news events roil markets temporarily [2]. Gary B. Smith had previously looked at several past events of this magnitude [3] — JFK assassination, Pearl Harbor, etc. — and discovered that markets tend to temporarily wobble, and then return to their prior behavior. Given the size of the Global Capital markets (100s of trillions of dollars) we saw that even 9/11 caused a temporary aberration. Its hard to even pick out 9/11 on a 10 year chart of the Nasdaq.

So don’t panic or make any decisions based on your knee jerk emotions.

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September 11 is hardly viewable on a 10 year Chart:
click for larger chart

10_year_nasdaq [4]

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Source:
Looking to the Past for Guidance [3] 
Gary B. Smith
TheStreet.com, 09/15/2001 11:40 AM EDT
http://www.thestreet.com/_rms/funds/gbs/10001103.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/07/terror-attack-in-london/

URLs in this post:

[1] Madrid Bombings: http://en.wikipedia.org/wiki/March_11,_2004_Madrid_attacks

[2] news events roil markets temporarily: http://www.thestreet.com/_tscana/comment/barryritholtz/10228215_2.html

[3] several past events of this magnitude: http://www.thestreet.com/_rms/funds/gbs/10001103.html

[4] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/10_year_nasdaq.gif

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