General Discussion, page-788

I had no real understanding, interest or involvement in the stock market in 1987, which I don't think served me very well now that I have an understanding of the opportunities available in this space.

I find the attached slide really interesting. The average return of 13.2% is pretty ordinary which is what put me off. Once of course you realise that a large number of stocks loose money which is balanced by a small number that make a fortune it can be a highway to very high returns if you can pick the winning formula.

I know a few people who lost faith in 1987 and retreated to safe havens. A risk-off triger was pulled on black Tuesday.

It's interesting to look at what the market performance slide tells us about that period in time. Was it really a disaster or had people been lulled into expecting too much during the ???? 80's ?

Absolutely crazy conditions happened again in the latter half of 2020 and early 2021 when the covid lockdowns influenced a frenzy of new entrants who were up for a risk-on period and fuelled crazy PE ratios.

Here's a rough analysis of the 80's

For simplicity I'll use averages i.e. 0-10 = 5

1983 +65% = 1.65
!984 - 2.5% = 1.44
1985 +45% = 2.09
1986 +55% = 3.24
!987 -5% = 3.08 ( -5% is year average the market was down 40% on the day)
1988 +15% = 3.54
1989 +15% = 4.08
1990 -15% = 3.47
1991 + 30% = 4.50

I can't find any historical Indices numbers to go back that far to cross check but it seems the 40% drop on black was not that significant for those who held nerve and stayed in.