Mr.Market’sBipolarDisorder 7Table1-2.Dow BurstsDateClosePoint
ChangePercent
ChangeSeptember 2, 1997 7,879.78 257.36 3.38
October 28, 1997 7,498.32 337.17 4.71
September 1, 1998 7,827.43 288.36 3.82
September 8, 1998 8,020.78 380.53 4.98
September 23, 1998 8,154.41 257.21 3.26
October 15, 1998 8,299.36 330.58 4.15
March 15, 2000 10,131.41 320.17 3.26
March 16, 2000 10,630.60 499.19 4.93in the Dow exceeding 3% that occurred in the late 1990s and early
2000s (see Table 1–2).
Apart from their magnitude, consider the proximity of these Dow
busts and bursts. The charts show two back-to-back reversals: The
October 27, 1997, bust of7.18% was followed the next day by a
4.71% burst, and the August 31, 1998, bust of6.37% was followed
the next day by a 3.82% burst. The three busts of August 1998 were
promptly followed by three bursts of September 1998, much the way
the bust of March 7, 2000, was followed by the bursts on March 15
and 16 of that year. It is hard to believe that these successive bursts
and busts are based on changes in fundamental information inves-
tors were rationally and efficiently acting on.
Beyond busts and bursts on the Dow and the Nasdaq in the late
1990s and early 2000s, recall one of the most dramatic single epi-
sodes of Mr. Market’s presence on Wall Street: the 1987 crash. The
Dow vaporized by 22.6% on a single day and nearly 33% in the
course of one month. The 1987 crash was not limited to the 30
common stocks on the Dow but was worldwide. The New York Stock
Exchange, the London Stoc kExchange, and the To kyo Stoc k
Exchange all crashed.
If stoc kmar ket prices really obeyed the ever-popular efficient
market theory (EMT) and accurately reflected information about
business values, some major changes in the body of available infor-
mation would be required to justify that crash. Many people tried to
explain it as a rational response to a number of changes in and
around mid-October 1987, including the following: