Historical Thought for the Day
April 1, 2010
Thought for the day:
Managers eager to bet heavily on their abilities usually have plenty of ability to bet on.
Warren Buffett, chairman's letter, Berkshire Hathaway annual report, 1991, http://www.berkshirehathaway.com/letters/1991.html
This day in financial history: 1822: The merchant ship Cambria docks in New York harbor with a news flash: The Bank of England has lowered its discount rate from 5% to 4%. Bank stocks lose 14% of their value in two hours as Wall Street digests the latest from London (which took a mere two weeks to cross the ocean).
Source: James K. Medbery, Men and Mysteries of Wall Street (Fields, Osgood & Co., Boston, 1870; reprinted, Fraser Publishing Co., Wells, VT, 1968) p. 289. 1945: As the market absorbs the news of Pres. Franklin D. Roosevelt's death the day before, the Dow Jones Industrial Average rises nearly 1% to close at 159.75. (Then as now, Wall Street liked Republicans.) 1954: Under a new provision of the U.S. Internal Revenue Code, April 15th becomes the due date for individual tax returns. 1991: The Leningrad Commodity and Stock Exchange (now the St. Petersburg Stock Exchange) re-opens for trading after decades of closure under Communism. Upon opening, it does a banner business in scrap wood and TV sets. 2000: The NASDAQ has one of its worst days ever, plunging s 355.49 points, or 9.67%, to finish at 3321.29, down 25.3% for the week. But "tech stocks have largely gone through their valuation adjustment," says Lehman Bros. strategist Jeffrey Applegate, who urges investors to buy. Robert Froelich, chief executive of the Kemper Funds, scoffs that the drop is "the bear's brief day in the sun" and adds, "this is the greatest opportunity for individual investors in a long time." Thomas Galvin, strategist at Donaldson, Lufkin & Jenrette, pronounces that "there's only 200 or 300 points of downside for the NASDAQ and 2000 on the upside." It turns out there are no points on the upside and more than 2000 on the downside, as the NASDAQ ends the year at 2470.52, on the way to its trough of 1114.11 in October 2002. Source: Jason Zweig
Source: Robert J. Shiller, "Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?" in Richard H. Thaler, ed., Advances in Behavioral Finance (Russell Sage Foundation, New York, 1993), p. 144; http://averages.dowjones.com
Source: http://www.ustreas.gov/education/history/events/04-apr.shtml#15
Source: http://www.spbex.ru/sespb/comWWW/About/Exchange_e.htm
Source: The Wall Street Journal, April 17, 2000, pp. A20, C1, C4; USA Today, April 17, 2000, p. 6B; www.nasdaq.com; G. William Schwert, "Stock Volatility in the New Millennium: How Wacky Is NASDAQ?" Table 1A, at http://schwert.ssb.rochester.edu/papers.htm
