1. Black Swan Octobers

The infamous Black Monday of October 19, 1987 has been remembered in the United States as the worst-ever one-day stock market decline. In merely one day, the market bellwether, the Dow Jones Industrial Average, dropped 508 points, losing 22.6 percent of its market value from the previous Friday’s closing. However, as heart-stopping as it was to watch the selling chaos minute by minute—if Wall Street believers in long-term equity investing stayed true to their preaching, the event might have hardly warranted more than a footnote.

Black Monday

That same day turned out to be the best buying opportunity for the next decade (see Figure 1.1). The 1987 bear market1 that followed Black Monday lasted less than a month, although ...

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