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Quote of the Day
“For owners of a business…the academics’ definition of risk is far off the mark, so much so that it produces absurdities. For example, under beta-based theory, a stock that has dropped very sharply compared to the market — as had Washington Post when we bought it in 1973 — becomes “riskier” at the lower price than it was at the higher price. Would that description have then made any sense to someone who was offered the entire company at a vastly-reduced price? In fact, the true investor welcomes volatility…. That’s true because a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses. It is impossible to see how the availability of such prices can be thought of as increasing the hazards for an investor who is totally free to either ignore the market or exploit its folly.”
Warren Buffett, chairman’s letter, Berkshire Hathaway annual report, 1993
- For another take on this issue, see our post: Risk vs Volatility – What’s the Difference?
November 29th – This Day in Stock Market History
1990 – The United Nations issues resolution 678, notifying Iraq that it had until January 15th to leave Kuwait. Iraq would not move, and starting on January 17th, the U.S. air bombardment would begin.
In July 1990, the Dow Jones Industrial Average would flirt with the 3,000 level, but never close above it. As Saddam Hussein’s aggression escalated, traders became more and more nervous. The Dow would fall 21%, nearly 650 points from 3,000 to 2,365, as the war seemed more and more inevitable.
But as victory became more evident, markets quickly recovered and the Dow would finally break the 3,000 mark on April 17th, 1991.
Best November 29th in Dow Jones Industrial Average History
1907 – Up 3.53%, 1.44 points.
Worst November 29th in Dow Jones Industrial Average History
1909 – Down 1.96%, 1.40 points.
Read of the Day
For a deeper dive into the topic of “risk”, check out Peter Bernstein’s amazing book, Against the Gods: The Remarkable Story of Risk
Go To Next Day: November 30th – Pixar IPOs at $22 a share, making Steve Jobs a billionaire –>
