Wild Things
Market indices had a volatile week, highlighted by big drops on Wednesday—the S&P 500 was down 2.31% that day, and the Nasdaq fell 3.64%—and then a rally on Friday to claw back some of that loss. For the week as a whole, the S&P 500 fell 0.8%, and the Nasdaq was down 2.1%. After a gain of 654 points on Friday, the Dow finished the week with a positive 0.8% return.
Markets move, and narratives change. Often, markets are mostly efficient—and sometimes, they are vastly inefficient. As Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting:
We generally believe you can just see anything in markets. I mean, it's just extraordinary what happens in markets over time. It gets sorted out eventually, but we have seen companies sell for tens of billion dollars that are worthless. And at times, we have seen things sell for...literally 20 percent or 25 percent of what they were worth. So we have seen and will continue to see everything. It’s just the nature of markets. They produce wild, wild things over time. And the trick is, occasionally, to take advantage of one of those wild things and not to get carried away when other wild things happen because the wild things create their own truth for a while.
We, nor anyone else, know for sure if last week's volatility will continue or become more extreme. But if things get wild, those who don’t get carried away can take advantage of them, as Mr. Buffett has done so many times in the past.
Tweets of the Week
In Case You Missed it…
Which One Is It? Equity Issuance and Retirement - by Michael Mauboussin and Dan Callahan
Crashes and Competition - by Ben Thompson
A Bit of Optimism Podcast: Mastery is an Infinite Game with performance psychologist Mike Gervais
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