This week marked the 30th anniversary of Black Monday. There are a lot of lessons to take away from that day and the events that lead up to it (the elusive lesson for many of us is how we’d react in that instance).
For instance, Robert Shiller made an important point about the impact of putting so much focus on what everyone else is doing (emphasis mine):
The declines that had already occurred in October 1987 looked a lot like those that had occurred just before the October 1929 stock market crash. That graphic in the leading financial paper, along with an article that accompanied it, raised the thought that today, yes, this very day could be the beginning of the end for the stock market. It was one factor that contributed to a shift in mass psychology. As I’ve said in a previous column, markets move when other investors believe they know what other investors are thinking.
Warren Buffett said the same thing in his ’87 letter (again, emphasis mine): Continue Reading…