Quote for the Week
One of the studies that I did for my first book, Pioneering Portfolio Management, looked at the behavior of endowments and foundations around the crash in October 1987. I used to talk about the crash in October 1987 without explaining what it was and I do still teach a seminar in the economics department in the Fall. I started talking about what happened in October 1987 and I looked around the room and I realized that I think the students were three or four years old in 1987 and weren’t yet reading The Wall Street Journal.
So, just to give you a little bit of context, the crash was really an extraordinary event. According to my calculations it was a twenty-five standard deviation event. One standard deviation happens one draw out of three, two standard deviations one out of twenty, three standard deviations is one out of one hundred. An eight standard deviation event happens once out of every six trillion trials. You can’t come up with a number to describe the twenty-five standard deviation event; it’s just too large a number, I think, for any of us to really comprehend. In essence, this collapse in stock prices — the one-day collapse in stock prices — I think in the U.S. the price was, depending on which index you were looking at, were down 21-22% in a single day. Interestingly, most major markets around the world were off by a similar magnitude. This one-day collapse in stock prices was a virtual impossibility. Of course, this was just a change in stock prices; it wasn’t related to any fundamental change in the economy or any fundamental change in corporate prospects. It was just a financial event. — David Swensen (source)
From the Archives
Last Call
- How Not to Invest – Humble Dollar
- Why I Have a Financial Planner – C. Benz
- Gold’s Role Reconsidered: What Drives Its Value and Returns? – L. Swedroe
- A Fresh Take on the Buffett-Munger Axis of Genius – Big Think
- Marks Memos: The Best of… – Oaktree
- Two Kinds of Luck – S. Godin
- Observations on AI and the Capital Markets in 2025 – V. Sridhar
- Straight Talk About Circular Deals in AI – Owenomics
- He Lost Nearly $100k to a Con Artist. He Turned it into a Business – The Hustle
- How Rockefeller and His Partners Built Standard Oil – A. Vernon