Not Thinking Straight
The worst investment thinking comes at market extremes. The nuttiest period in my 30-year investment memory was the peak of the New Era, in 1999-2000. "Dow Jones 36,000" was a best-seller. Morningstar technology analysts received death threats for downgrading stock ratings. The 80-year old mother of a senior Morningstar executive loaded up on CMGI, an Internet bubble company that lost 99% of its value over the next two years.
The next silliest is today: The Great National Funk. This, too, came courtesy of a stock-market extreme: the 2008 market crash, which gave the S&P 500 its biggest calendar-year loss in 77 years. Once again, the sheer size of the market's movement, like a power surge to an appliance, or a tidal wave to a retaining wall, overwhelmed the senses. It shorted circuits, overflowed barriers, battered rationality. The New Era inspired giddiness and greed; The National Funk brought anxiety and fear.