“If the efficient market hypothesis is true – and the Challenger explosion example certainly implies it is – The wisdom of crowds has enormously far reaching consequences.”

-Andrew Lo, from his book Adaptive Markets: Financial Evolution at the Speed of Thought

As we build out our ‘This Day in Stock Market History‘ archives, I like to go into more detail on events that I believe offer important lessons for investors, had significant historical impact, or events that are just simply interesting.

This week in history, on January 28th, 1986, an event occurred that meets all three of these criteria – The stock market’s behavior after the explosion of the Challenger space shuttle.

Every once in a while, I like to take a closer look at an event that comes up in our “This Day in History” archive, which gets posted daily on Facebook, Twitter, and is now available as an Amazon Flash Briefing.

Today we look into the life of Peter Lynch, whose birthday is this week, and who is one of the most successful mutual fund managers in history.

What did Peter Lynch look for in an investment, and what stocks would Peter Lynch buy today?

Lynch looked for 5 key criteria when selecting an investment:

1. Buy What You Know

2. Growth At A Reasonable Price

3. Avoid The Hot Stocks

4. Stay Small

5. Strong Balance Sheet

We’ll look at these in more detail below, and a list of companies that meet all of these criteria –  but first a quick look at Lynch’s historic run as a mutual fund manager:

Peter Lynch – One of the Investing Greats

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Exciting news! In addition to getting our ‘This Day in Stock Market History’ posts on Facebook and Twitter, it is now available as an Amazon flash briefing skill also. Here’s an example of what to expect: [continue reading…]

This week marks the anniversary of, at the time, the largest bankruptcy in American history and the conclusion of the largest case of accounting fraud in history. *

WorldCom declared bankruptcy July 21^st, 2002 with $107 billion in assets.

How did this fraud develop? How was the WorldCom scandal discovered? How did WorldCom investors fare? [continue reading…]

Quote of the Day

“By the end of the first day of trading, some 2.5 million shares had changed hands, and the price of Microsoft’s stock stood at $27.75. The opportunity to take a quick profit was too great for many institutional investors to resist. Over the next few weeks they sold off roughly half their shares.” – Fortune on the Microsoft IPO

After making a quick 40%, almost half of the original shares purchased at the IPO were sold. Over the next 30 years Microsoft stock would rise another 75,000%!

This Day in History

1907 – The Panic of 1907 is still a few months away, but cracks are appearing in the confidence investors have in American companies. Stocks break lower, led by the once coveted railroads. The Dow Railroad index falls from 112.53 to 107.52. (Source: It was a very good year)

1986 – Microsoft Corp (Ticker: MSFT) goes public with an initial offering price of $21 per share ($0.07 today adjusted for splits and dividends). Every $100 invested at its IPO is worth a little more than $75,000.

Best March 13th in Dow Jones Industrial Average History

2003 – Up 3.57% or 269.68 points

Worst March 13th in Dow Jones Industrial Average History

1907 – Down 3.94% or 2.48 points

Best March 13th in S&P 500 History

2003 – Up 3.45%, 27.71 points

Worst March 13th in S&P 500 History

2007 – Down 2.04%

Picture of the Day

Bill Gates was on the cover of Fortune Magazine after the successful IPO of Microsoft. The original article published July 21st 1986 can be found here.

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This Day in History – March 4th

March 4th, 1957 – The S&P 500 index is introduced. Although Standard and Poors introduced its first stock index in 1923, today marks the anniversary of the S&P 500 index as we know it today. It closed the day at 44.06.

Best March 4th in S&P 500 History:

 2009 – Up 2.38%

Worst March 4th in S&P 500 History:

 2003 – Down 1.54%

Best March 4th in Dow Jones Industrials History:

1926 – Up 4.38 %, or 6.32 points

Worst March 4th in Dow Jones Industrials History:

 1897 – Down 1.88% or .57 points

Chart of the Day

The S&P 500 since its creation in 1957:

Since March 4th 1957 the S&P 500 has returned 4424%, not counting dividends.

Or,  a compounded annual growth rate of 6.67%, not counting dividends. [continue reading…]

Quote of the Day

”I’ve thought the whole thing over, and if we are going bust, we will go bust big.”

– Charles M. Schwab of Bethlehem Steel on his plan to build a new steel mill to produce steel beams in the shape on an “H”. The design would later turn into the “I” Beam.

Hence, the company’s logo:

This Day in Stock Market History

February 18th 1862 – Birthday of Charles M. Schwab (2/18/1862 – 9/18/1939)
American entrepreneur who started his career with Carnegie’s steelworks and who later pioneered Bethlehem Steel. ( He is unrelated to the Charles W Schwab of the brokerage today.)

The company would become a major name on Wall Street as WW1 and WW2 produced massive steel orders. One such run up is featured in the book “It Was a Very Good Year” in which the price of Bethlehem steel shot up over 70 points in 10 days, and rising from 88 to 117 on April 9th.

With his leadership Bethlehem steel would become the second largest steel company in the world, and his idea of the “H” Beam would revolutionize the building of skyscrapers.

He would amass a wealth of nearly a billion dollars (adjusted for inflation), before dying in debt in 1939. He was an avid gambler, was known for his extravagant parties and extra-marital affairs.

A great, short biography of Schwab is available here.

Best February 18th in S&P 500 History:

2003 – Up 1.95% or 16.28 points

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Quote of the Day:

Buffett on Romance:

This Day in History:

Best February 14th in S&P 500 History:

• Year 2003 – S&P 500 up 17.52 points, or 2.14%

Worst February 14th in S&P 500 History:

• Year 1980, S&P 500 down 1.45%

1933 –
At 1:32 AM on a Tuesday morning, Governor William Comstock of Michigan declares a 8 day banking holiday as Michigan banks struggle to remain open. In the midst of the great depression banks nationwide were stressed, but Michigan was hit particularly hard by the great depression. After failed negotiations with Henry Ford for help, the governor was forced to declare a banking holiday to prevent defaults. However the banks would not open in just 8 days. Banks in many other states were not in any better condition than those in Michigan. By early March, 36 states had banking operations suspended.

Then on March 6th, just 36 hours after being sworn into office, President Roosevelt declared a week long national bank holiday. Over the next week panic would subdue and with the help of legislation from congress, the worst of the bank runs would be over.

Image of the Day [continue reading…]