You criticize my description in “A Failure, But Not Of Prediction”, which was:
The stock market is a giant coordinated attempt to predict the economy, and it reached an all-time high on February 12, suggesting that analysts expected the economy to do great over the following few months. On February 20th it fell in a way that suggested a mild inconvenience to the economy, but it didn’t really start plummeting until mid-March – the same time the media finally got a clue.
As my post said, the market started declining a little in February. Using the S&P link you provide, on March 2⁄28, it reached 2954, just 12% lower than its all-time high, then quickly recovered to only 8% lower a few days later. For comparison, the market fell 7% in May 2019 because Donald Trump made a bad tweet, and then everyone laughed it off and forgot about it within a few weeks. I think my claim that “it fell in a way that suggested a mild inconvenience to the economy” is a fair description of this.
It had its next major fall on March 9, reaching a new low (34% off its all-time high) March 23. I think it is fair to say it started plummeting in mid-March, though I would not blame you if you consider March 9 more “early” than “mid”. For comparison, Jacob wrote his post warning that the coronavirus would be a big deal in late February, and I wrote one saying the same on March 2.
Some of this depends on the “correct” amount of market crash. I was writing my post in early April, when the market was near its floor. If that was the “correct” amount of market crash, then the early February crash underpredicted it, and the market didn’t “get it right” until mid-March. As you write this post now, the market has recovered, and if it’s at the “correct” price now, then the early February crash was basically correctly calibrated and the mid-March crash was an overreaction.
To be clear, I think time has proven you correct about the EMH (and this is easy for you to say, now that the market has stabilized). I’m not debating any of the points in your post, just your accusation that I am a “revisionist historian”.
If we take the 6th of March—the last trading day before the March 9 fall—then the market is down 12.2%, which is already in ‘correction’ territory, and an extremely rapid descent by historical standards.
If we take the 16th of March—the closest trading day we have to ‘mid-March’—the market is already down 29.5% per cent, which is not too far off the bottom, and well and truly into ‘bear’ territory.
To be clear, I think time has proven you correct about the EMH (and this is easy for you to say, now that the market has stabilized).
I thought the talk about EMH being dead was weird at the time, and left a comment saying as much. I also wrote a post on March 24, which later turned out to be the bottom, saying that timing the market was a really bad idea, and the buy-and-hold forever strategy was about the best anyone could hope for. I am as surprised about the speed of the rebound as anyone! I possess no predictive powers, but I have consistently been defending boring orthodoxy.
I admire and respect you very much as a person and a thinker—seriously man, you have no idea—so I feel extremely bad if I have made you feel bad. I didn’t mean to accuse you specifically of being a revisionist historian—it was more of a general vibe that seemed to be happening a lot—and although I think the passage as stated is misleading, I don’t think it’s deliberately so, and I’ve edited the post so it comes off as less accusatory.
Re: “revisionist history”:
You criticize my description in “A Failure, But Not Of Prediction”, which was:
As my post said, the market started declining a little in February. Using the S&P link you provide, on March 2⁄28, it reached 2954, just 12% lower than its all-time high, then quickly recovered to only 8% lower a few days later. For comparison, the market fell 7% in May 2019 because Donald Trump made a bad tweet, and then everyone laughed it off and forgot about it within a few weeks. I think my claim that “it fell in a way that suggested a mild inconvenience to the economy” is a fair description of this.
It had its next major fall on March 9, reaching a new low (34% off its all-time high) March 23. I think it is fair to say it started plummeting in mid-March, though I would not blame you if you consider March 9 more “early” than “mid”. For comparison, Jacob wrote his post warning that the coronavirus would be a big deal in late February, and I wrote one saying the same on March 2.
Some of this depends on the “correct” amount of market crash. I was writing my post in early April, when the market was near its floor. If that was the “correct” amount of market crash, then the early February crash underpredicted it, and the market didn’t “get it right” until mid-March. As you write this post now, the market has recovered, and if it’s at the “correct” price now, then the early February crash was basically correctly calibrated and the mid-March crash was an overreaction.
To be clear, I think time has proven you correct about the EMH (and this is easy for you to say, now that the market has stabilized). I’m not debating any of the points in your post, just your accusation that I am a “revisionist historian”.
Hi Scott,
If we take the 6th of March—the last trading day before the March 9 fall—then the market is down 12.2%, which is already in ‘correction’ territory, and an extremely rapid descent by historical standards.
If we take the 16th of March—the closest trading day we have to ‘mid-March’—the market is already down 29.5% per cent, which is not too far off the bottom, and well and truly into ‘bear’ territory.
I thought the talk about EMH being dead was weird at the time, and left a comment saying as much. I also wrote a post on March 24, which later turned out to be the bottom, saying that timing the market was a really bad idea, and the buy-and-hold forever strategy was about the best anyone could hope for. I am as surprised about the speed of the rebound as anyone! I possess no predictive powers, but I have consistently been defending boring orthodoxy.
I admire and respect you very much as a person and a thinker—seriously man, you have no idea—so I feel extremely bad if I have made you feel bad. I didn’t mean to accuse you specifically of being a revisionist historian—it was more of a general vibe that seemed to be happening a lot—and although I think the passage as stated is misleading, I don’t think it’s deliberately so, and I’ve edited the post so it comes off as less accusatory.