In investing, pessimism is your friend, euphoria is the enemy.

—Warren Buffet    CNBC, Interview, July 3, 2009

In autumn 2008, the U.S. stock market crashed to the lows seen only at the depth of the tech stock bubble burst during 2000–2002, then it plunged even further a few months later.

The Dow Jones Industrial Average had just made historic highs the previous year. Euphoria still hung in the air. No one expected to see record lows again—not another bear market, not so soon. Yet, within 12 months, precipitated by house price declines and subprime mortgage defaults, the Dow Jones Industrial Average saw half of its value evaporate. Almost in a flash, investors saw their gains from U.S. stocks in the past decade disappear—all the ...

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