What were you doing 25 years ago today? I was at a real estate loan closing in Texas. That's when the stock market crashed . . . losing 22% of its value in one day -- still the all-time greatest one-day loss.
Of course, it was terrifying, especially to those who didn't believe it was only a temporary loss, which it was. But, could it happen again?
Of course, it could. In fact, I am more worried about a technology or "fat finger" glitch now than ever before. Don't forget the "flash crash" in May of 2010, when the Dow dropped almost a thousand points and then regained most of that loss -- all within one hour. While it is unlikely that the market could suffer a complete collapse from a technological glitch, much work remains to be done before that possibility can be eliminated. Indeed, some market analysts suspect a reason that retail investors are largely not invested is that they are waiting to catch some bargains when the collapse occurs, but I suspect that is not the case. People are simply scarred by their memory of Lehman in 2008, of the market low in March 2009, as well as 1929.
Of course, like any anniversary, today should be celebrated! We survived that crash and then went on to set many, many new market highs. Paraphrasing Warren Buffet, I don't know where the market will be next month, but I do know where it will be in ten years . . . up!
Most of my portfolios have a large position in cash and short-term bonds, which removes much of the variability for now, but only a few are completely out of stocks (which I don't recommend). As anxiety rises, the allocation to low-risk assets should also rise. I expect to increase stock holdings substantially within the next three months, but it is too early to make that decision now.
For now, celebrate that you survived and didn't have to change your standard of living, even after the biggest one-day loss in history . . . of course, this is capitalism . . . thank God!
Of course, it was terrifying, especially to those who didn't believe it was only a temporary loss, which it was. But, could it happen again?
Of course, it could. In fact, I am more worried about a technology or "fat finger" glitch now than ever before. Don't forget the "flash crash" in May of 2010, when the Dow dropped almost a thousand points and then regained most of that loss -- all within one hour. While it is unlikely that the market could suffer a complete collapse from a technological glitch, much work remains to be done before that possibility can be eliminated. Indeed, some market analysts suspect a reason that retail investors are largely not invested is that they are waiting to catch some bargains when the collapse occurs, but I suspect that is not the case. People are simply scarred by their memory of Lehman in 2008, of the market low in March 2009, as well as 1929.
Of course, like any anniversary, today should be celebrated! We survived that crash and then went on to set many, many new market highs. Paraphrasing Warren Buffet, I don't know where the market will be next month, but I do know where it will be in ten years . . . up!
Most of my portfolios have a large position in cash and short-term bonds, which removes much of the variability for now, but only a few are completely out of stocks (which I don't recommend). As anxiety rises, the allocation to low-risk assets should also rise. I expect to increase stock holdings substantially within the next three months, but it is too early to make that decision now.
For now, celebrate that you survived and didn't have to change your standard of living, even after the biggest one-day loss in history . . . of course, this is capitalism . . . thank God!
