Posts filed under “Markets”

Post Traumatic Crash Disorder & the 1962 Flash Crash

click for ginormous chart
1962b

Source: Bloomberg

On this day 53 years ago, Wall Street had one of its worst sessions ever. As the Wall Street Journal reported, “The Dow Jones Industrial Average fell 5.7%, down 34.95, the second-largest point decline then on record.” It was part of a longer decline that some called the “Kennedy Slide of 1962.”

Even though stocks had climbed for more than 15 years in the postwar rally, many investors were nervous that year. As LIFE magazine reported, the psychology underlying the 1962 retreat was still fixated on the crash of 1929: 

The glacial heights of the stock boom suddenly began to melt in a thaw of sell-off. More and more stocks went up for sale, with fewer and fewer takers at the asking price. Then suddenly, around lunchtime on Monday, May 28, the sell-off swelled to an avalanche. In one frenzied day in brokerage houses and stock exchanges across the U.S., stock values — glamor and blue-chip alike — took their sharpest drop since 1929. Memory of the great crash, and the depression that followed, has haunted America’s subconscious. Now, after all these years, was that nightmare to happen again?

It seems odd to blame the recency effect for a preoccupation with events 33 years earlier, but that’s what it was. The enormous impact of 1929 and the Great Depression had outsize and lasting effects that haunted investors decades later. It was still lurking even after the highs of 1929 were surpassed in 1954. Post traumatic crash disorder is the tendency to obsess over what happened in the past, and project it forward as the most likely future outcome.

 

Continues here: Market Crashes Haunt Investors for Decades

 

 

Category: Markets, Psychology, Sentiment

S&P 500: 25 Largest Companies & their Cash Holdings

Click for ginormous graphic

Category: Markets

MiB: Dimensional Fund Advisors’ David Booth

This week, our Masters in Business radio podcast, we speak with David Booth, the founder, chairman and co-CEO of Dimensional Funds Advisors (DFA). At the University of Kansas, Booth earned his B.A. in economics and M.S. in business. He went to receive his MBA from University of Chicago Graduate School of Business, where he became the teaching assistant for future…Read More

Category: Markets

Top 10: Wall Street Sayings That Should Be Questioned

In honor and reverence to one of my favorite comedic personalities, David Letterman, and the end of his talk show career here is my own market Top 10 List.   Top 10 list of Wall Street sayings that should be questioned 10) There is a lot of cash on the sidelines. There is always a…Read More

Category: Humor, Markets, Really, really bad calls

Succinct Summations of Week’s Events 5.15.15

Succinct Summations week ending May 15th Positives: 1. The S&P 500 hit a new all-time high. 2. EU GDP rose 1% y/o/y. 3. NFIB small business optimism index rose to 96.9 4. Initial jobless claims came in at 264k, the 4-week moving average is the lowest it has been since April 2000. 5. Empire state…Read More

Category: Markets

Bargains Reside Beyond U.S. Borders

Source: BlackRock

Category: Markets, Valuation

Business Booms and Busts

Click to see a single chart of business booms and depressions since 1775. Source: HistoryShots InfoArt

Category: Cycles, Digital Media, Markets

Understanding Broad Trends Driving Stock Markets

Good to be back in the saddle after of a week of traveling in Silicon Valley, Napa and San Francisco. And I thought New York real estate prices were crazy. Whenever I am away, I like to ease back into the groove by reviewing some broad market and economic metrics. It isn’t that a lot…Read More

Category: Markets

Tren Griffin runs 25IQ, a blog about business models, investing, technology, and other aspects of life that he find interesting. He works for Microsoft; Previously he was a partner at Eagle River, a private equity firm established by Craig McCaw. ~~~ A Dozen Things I have Learned from Barry Ritholtz about Investing As part of my “A Dozen Things…Read More

Category: Apprenticed Investor, Investing, Markets

Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania David Card, Alan B. Krueger NBER Working Paper No. 4509 Issued in October 1993 NBER Program(s):   LS On April 1, 1992 New Jersey’s minimum wage increased from $4.25 to $5.05 per hour. To evaluate the impact of the law we…Read More

Category: Markets