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Quote of the Day

In his commentary for a newer edition of Ben Graham’s Intelligent Investor, Jason Zweig makes a comment that he once proposed a BGFN (Ben Graham Financial Network) that covers the stock market crashing as good news. He goes on to say what that network would sound like on “bad” stock market days:

“ …the anchorman announces brightly, “Stocks became more attractive yet again today, as the Dow dropped another 2.5% on heavy volume – the fourth day in a row that stocks have gotten cheaper. Tech investors fared even better, as leading companies like Microsoft lost nearly 5% on the day, making them even more affordable.  That comes on top of good news of the past year, in which stocks have already lost 50%, putting them at bargain levels not seen in years. And some prominent analysts are optimistic that prices may drop still further in weeks and months to come.”

His hypothetical network was needed by individual investors during the 1987 stock market crash. The volatility during October 1987 scared many individuals out of the market for years, just as the market began its best bull market run in history.

October 21st – This Day in Stock Market History

October 21st, 1957 – The Dow Jones Industrial Average falls 10.77 points, or 2.48% as fear continues to build that the Soviets are winning the space race. Although Sputnik was launched weeks prior, on October 4th 1957, The U.S. had done very little to demonstrate that it had an answer to the Soviet threat.

In total, U.S. stocks would fall about 10% the few weeks after Sputnik was launched.

Source: The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average

October 21st, 1987 – Stocks continue their rebound from Black Monday 2 days prior. On this day, the Dow Jones Industrial Average finished up 186.84 points, a 10.15% rise. At the time it would be the largest one day point increase in history, and the 5th largest one day percentage gain in the Dow’s history.

The rebound in stocks on the second day after the market’s record setting 22% drop on October 19th 1987 was much more broad based than the day prior. On this day, 1768 of the NYSE’s 1,978 listings advanced higher (compared to just 509 the day before).

New York Times front page on Oct 22, after the second day of stocks recovering from black monday 1987
New York Times front page on Oct 22, after the second day of stocks recovering from black Monday 1987


 

Best October 21st in Dow Jones Industrial Average History

1987 – Up 10.15%, 186.84 points.

Worst October 21st in Dow Jones Industrial Average History

1932- Down 5.26%, 3.39 points.

Read of the Day

An article from the archives: Market Declines Can Be a Huge Benefit for Long Term Investors

<– Go To Previous Day: October 20th, 1987 – One day after the record 22.6% drop on “Black Monday”, stocks begin to rebound.

Go To Next Day: October 22nd, 1962 – President Kennedy announces a blockade on Cuba and confirms rumors that the Soviets are setting up missile sites in Cuba. –>