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Quote of the Day
“There is the old pilot quip that their jobs are “hours and hours of boredom punctuated by moments of sheer terror.” It’s the same in investing. Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.”
- From The Aquirerers Multiple Blog, From an idea in Morgan Housel’s book Psychology of Money
September 22nd – This Day in Stock Market History
September 22nd, 1987 – The Dow Jones Industrial Average has its largest single day point gain in history (at the time), rising 75.23 points.
Most of the gain came in a blistering rally over the last 2 hours of the day.
The jump would come after an 8 percent drop in the index over the previous 3 weeks.
However the excitement would not last long, one month later “Black Friday” would occur, October 19th, 1987, which to this day remains the worst day in stock market history, when the Dow fell 22 percent.
September 22nd, 2000 – Intel’s stock falls 22%, cutting the company’s market cap by $91 billion.
At the time, it would be the largest single day decline in a company’s market cap in history.
Intel’s record for largest single day decline in market cap but would last until July 26th, 2018, when Facebook shares would drop 18%, taking $119 billion off of the company’s market cap.
September 22, 2008 — Kraft Replaces AIG in the Dow, and the Panic Rolls On
One of the most symbolic market events of the 2008 crisis happened on September 22, when Kraft Foods formally replaced American International Group in the Dow Jones Industrial Average.
AIG, a roughly $1-trillion-asset insurer that had written credit-default swaps on more than $500 billion of assets, had just been effectively nationalized on September 16 with an $85 billion Fed loan for a 79.9% equity stake, one day after Lehman Brothers filed the largest bankruptcy in U.S. history.
A company that had been a Dow component since 2004, having lost over 90% of its value, was simply swapped out for a maker of cheese and crackers.
The AIG-for-Kraft swap is also a lesson in how indexes quietly heal themselves, and a primary benefit in long-term index fund investing. The Dow you buy today is not a museum of failed companies – its worst constituents are continuously replaced. That survivorship is a feature of index investing, but it also means the index’s long-run chart reflects the survivors, not the experience of anyone who rode a failure like AIG all the way down.
The Dow closed September 22, 2008 at 11,015.69, down 3.27% — which stands as the worst September 22 in the index’s history.
September 22nd, 2015 – Volkswagen admits to installing software to defeat emission testing standards.
Shares plummet, and fall 19 percent on the day, and are down 38 percent over the last 2 days.
Shares would finally bottom out on October 2nd at 92 euros per share, down more than 46 percent in 2 weeks.
Read of the Day
NY Fed Liberty Street Economics: Crisis Chronicles: The Gold Panic of 1869, America’s First Black Friday
The most important date of the Gold Panic of 1869 was September 24th, when the true crash occurred. But on this day, the plot was unraveling. This article by the NY Fed provides an authoritative overview of the crash.
<– Go To Previous Day: September 21st, 1931 – Great Britain abandons the gold standard
Go To Next Day: September 23rd, 1998 – Long Term Capital Management is bailed out –>