The “Slap in the Face” Award: The Punditocracy

Steve McDonald
by Steve McDonald

Here’s a big, well-deserved slap in the face for all those market pundits who think we are in a period of volatility. And especially the permabears who make life so annoying for the rest of us.

The entire money press and media has been unable to focus on anything else but that 500-point drop we saw in intraday trading a few weeks ago. We didn’t close down 500 points or 2.8%; we lost only 1.05% at the close.

But the so-called experts are treating this like it was another Black Monday.

So, let’s see if you can answer this question about Black Monday. Obviously the experts cannot.

How much would the market have to drop now to equal the drop we saw on Black Monday in 1987?

The answer: 3,700 points on the Dow. A 22% drop!

Yup! We would have to close down 3,700 points on the Dow to equal the drop we saw in October of 1987.

CNBC has had a whole host of experts on all day every day saying things like, “This collapse is what I have been saying for two years,” “This will be a disaster,” “A weak market,” “Get out now.”

Where do they get these guys? They seem to crawl out from under rocks whenever we have a sell-off.

But... and this is one of my big buts, so pay attention.

As bad as it seemed back in ’87 - and yes, I was there - that sell-off was almost all computer driven. Trading programs back then were really rudimentary, and no one knew how to turn them off. Once the indexes started popping off, the selling accelerated and the computers of the day went crazy.

But the most significant point isn’t that it dropped 22% in one day - even during the worst day this year the biggest drop we have seen intraday has been 2.8% - no, the most important lesson here is that it came back.

In less than one year, actually it was August of 1988, we went back over the previous high and then the Dow continued to run up another 15,200 points - 15,200, to the most recent new high and most investors have missed all of it!

And that may be the biggest slap in the face of all.

Keep it in perspective. Don’t let the talking heads control your money!

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