Black Monday, 25 Years Later

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Could it happen again? What about buy-and-hold?


1 Comment for “Black Monday, 25 Years Later”

  1. I love Danielle’s comments. She is one of the most knowledgeable speakers on general economics and social issues today. But after listening to her — and indeed most pundits/analysts/economists/politicians — I respond with a resounding, “So!?” There are so many moving pieces to an evaluation of the market that it is impossible for anyone to determine how they are all going to come together. Some examples: interest rates, geopolitical issues, elections, and the weather. If I was to say that I could predict any one of these with accuracy, people would say I was nuts, yet investment pundits claim to be able to predict a thousand such variables to come up with a thesis of what is going to happen in the markets.
    The danger of this approach is that it blinds the speaker to counter-intutive opportunities. For example, only an idiot would invest in Greece, right? After all, they are the quintessential basket case that everyone points to as the worst-case scenario of any sovereign economy: “If we don’t get our act together, we will become Greece!!” Yet, I and some other investors, invested in the Greece ETF (GREK) two months ago and cashed out this week for a 50% gain. It wasn’t any particular market insight that made this investment possible, it was because the Greek market was showing signs of upward movement and we all jumped on board. No opinions, no paralysis-by-analysis, no excessive thought, no social commentary — just action and profit.
    Of course, it is inevitable that the markets will crash, they always do, and probably because of the reasons that Danielle points out. And no doubt ten years from now her tag line and those of similar perma-bears will be that they called the market crash of 2013/2014/2015, or whenever it occurs. But in 2008 there were several fund managers who returned as much as 569%. And some have continued to average 30% plus annually since then. In fact, some have avaraged over 25% annually for 40 years. The reason they are successful is that they respond to what IS happening, not what SHOULD BE happening. There’s a great story from Paul Tudor-Jones about how he went massively long the market the Friday before Black Monday in 1987. He realized his incredible error on Sunday, and sold everything for a great loss on Monday, then immediately went massively short, and ended the year with a gain. He responded to what WAS happening, not what he theorized SHOULD be going on.
    I would rather have my money managed by a scientist, not a social activist. Both are important, and both serve their purpose. But if I want profits, I know which one I’m going with.

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