Page 54 - THE MARKET WHISPERER

52 PART 1 - Allow Me To Introduce You… To The Stock Exchange

Crises

If you run a statistical check of the average period between each crisis
throughout market history, you’ll discover that during your own adult
lifetime, at least three crises will occur. In other words, if you’re a short-
term investor, there’s a reasonable chance that sooner or later you’ll lose
a sizeable portion of your capital. That’s one of the risks of the market
for investors. For someone with the good luck to experience a first crisis
around the age of forty, there’s a good chance of survival, but if it catches
you when you’re sixty-five, I’m not certain you’ll manage to save your
pension. An exception is the last decade, 2000-2010, during which two of
biggest crises in market history occurred in close proximity: the Dot-Com
Crash and the Sub-Prime Crash.

The Great Depression:
Black Monday and Tuesday, 1929

The crash of Black Monday, October 28, 1929, with its 12.8% drop, followed
the next day by Black Tuesday with its 11.73% drop, are known as “The
Great Crash,” which led to a ten-year economic slump known worldwide as
“The Great Depression.” The crisis occurred on the heels of the era known
as “The Roaring Twenties,” a contrasting period of some ten years during
which America wildly celebrated the victory of the First World War, living
on endless credit, with real estate prices going through the roof.

Unlike other crashes, the Great Depression lasted several years, dipping
to an all-time low in July 1932, which marked the lowest slump of the
entire twentieth century’s capital market. The market only recovered to
its pre-slump level in November 1954. In actuality, young adults who held
stocks prior to the slump spent the bulk of their adult lives waiting for the
recovery.

Black Monday, 1987

As in other crashes, herd panic swayed the game on October 19, 1987.
In 1929, the “herd” flooded the streets and swamped brokers’ offices. In
1987, the “herd” blocked the brokers’ telephone lines. Hysterical “sell at