Monday, June 07, 2010

stochastic irrationality

So on a quiet summer Friday the stock market loses over 300 points.  No war, famine, or other cataclysmic event during the day. Yes, a big oil leak, but we are now almost 50 days from the beginning of that right?  So, it is hard to see how any new development in the Gulf is responsible for such a big drop in the DJIA.  As I was pondering that  I came across this AP graphic the PG ran January 2, 1943.  A retrospective on the first year of World War II as far as the US was concerned, and its impact on the stock market. 

This all just amazes me.  Realize that the history of 1942 included people contemplating everything from invasions on both the West and East coasts of the US to the very future of Western democracy as things looked bleak in both Europe and the Pacific.   The events that were happening rapid-fire were each some of the biggest historical events of the century.  Yet good or bad the volatility the stock market saw all year is less than we live with almost daily today. The day after Pearl Harbor the DJIA lost less than 3%, so about what Friday was like.


Anonymous johnnyg said...

Quiet Friday? Dude. How could you of all people miss the fact that the private economy netted only 41k jobs in May? Way off everyone's predictions, and well below even the anemic pace of January to April.

Monday, June 07, 2010 10:25:00 AM  
Blogger BOD said...

Clearly there was a big difference between WWII mentality and today's age, but Friday was anything but a 'quiet summer friday'. People were looking to a strong jobs report to indicate a strengthening of a recovery out of the worst economic depression/recession in decades. The President indicated he thought it was going to be good. People were excited. And then it came out and not only was government responsible for like 95% of the new hires, but the amount of private sector jobs was hundreds of thousands below projections - and below what was created in previous months. That is why people were spooked.

Monday, June 07, 2010 10:29:00 AM  
Anonymous Anonymous said...

The day after Pearl Harbor the DJIA lost less than 3%, so about what Friday was like.

But note that the graph shows the AP Average of 40 Stocks, not the DJIA. The AP average looks to have been considerably more volatile than the Dow in the days following Pearl Harbor.

Monday, June 07, 2010 10:30:00 AM  

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