The Making of a Market Guru: Forbes Presents 25 Years of Ken Fisher

Chapter 4. 1987: Crash!

"Good money management starts with sticking to a good long-term strategy. That doesn't mean rigidity and inflexibility. But, then again, it doesn't mean jumping into stocks to chase rising prices — and jumping out at the first sign of crisis."

—"What Goes Up ..." June 15, 1987

"Nothing new of any real importance has happened in the market for centuries. So, if financial history doesn't include a type of event, it probably won't happen."

—"The 2% Rule," December 14, 1987

Nineteen-eighty-seven started out like any other year in a raging bull market. It wouldn't end the same way. The S&P 500 jumped 1.8 percent on the first trading day and didn't look back. By the end of January, it was 13 percent higher. By the end of February, the S&P 500 was up 18 percent. Then 21 percent by March's end. On August 31, the S&P 500 was up a whopping 39 percent year to date.^[9]

As the year progressed, Ken became increasingly concerned a bear market was approaching. Too many people were finding it too easy to make money in stocks. Suddenly, everyone under the sun was a stock market forecaster. The easy gains of early 1987 had taxi drivers, hairdressers, and carpenters — who had never been investors — forecasting stock prices to whoever would listen. "With a formal academic background and years of professional study, I never know where the market is going, but 'they' do. What is more interesting is that 'they' never used to care. But they do now ... The time will come again when John, ...