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Quote of the Day

“The consistent losers in the stock market, from my personal experience, are those who are unable to resist being swept up in some kind of tulip-bulb craze. It is not hard to make money in the stock market…investors who select a portfolio of stocks by throwing darts at the stock listings in the Wall Street Journal can make fairly handsome long-run returns.”

Burton Malkiel, A Random Walk Down Wall Street

October 2nd – This Day in Stock Market History

October 2nd, 1919 – President Woodrow Wilson suffers a serious stroke, which would have him partially paralyzed.

New York Times coverage of Woodrow Wilson's stroke on October 2nd, 1919
New York Times coverage of Woodrow Wilson’s stroke on October 2nd, 1919

The stock market would fall 2% the following day on the news, and 20% over the next 3 months.

In total, 1919 would see the Dow fall from 119 to 79, much on the uncertainty in Wilson’s condition.

Wilson’s condition would slightly improve, but he would remain wheelchair bound for a long while and eventually be able to get around with a cane. His wife and doctor hid the President’s condition from the public for many months, refusing to acknowledge that he was unable to perform the duties of the President.

October 2nd, 1990 – Japan’s Nikkei index has its best day in history, rising 13.2%, 2,676.55 points.

The rise would come in the midst of the bursting of the Tokyo stock bubble. Despite this one day rise, the Nikkei would finish the year 38% lower than where it started.

From 1980 to 1989, the Nikkei index would rise from 6,600 to nearly 40,000 before reaching its peak on December 29th, 1989 at 38,916.

Chart Source: MacroTrends

The Japanese stock market bubble was inflated by the rise in Japanese real estate. The valuations at the peak would be truly astounding:

  • The Nikkei index as a whole would trade at a P/E Multiple more than 60x.
  • The Japanese property market was valued at over 2,000 trillion yen – 4x the real estate value of the entire United States.

In fact, many Japanese companies would find it more lucrative to buy stocks rather than invest in their own business!

Best October 2nd in Dow Jones Industrial Average History

1897 – Up 2.04%, 0.77 points.

Worst October 2nd in Dow Jones Industrial Average History

2008 – Down 3.22%, 348.22 points.

Video of the Day

Burton Malkiel gave a talk at Google in 2010 that you can watch here. It is a little slow to get started, but it is worth your time:

 
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