Former tech entrepreneur (co-founder of the music software company Sibelius). Among other things I now play the stock market, write software to predict it, and advise tech startups. I have degrees in philosophy.
Yes, you could well be right. And there may be ones that are both - e.g. no doubt external shocks sometimes make a bubble burst; or maybe 9/11 accelerated the collapse of an already bursting bubble. Unfortunately, not being an economist, I'm not qualified to do a more sophisticated analysis!
Do you mean the final graph? The black line shows the mean of previous crashes, not 2020; I'm just superimposing 2020 dates on this to show how prices historically continued to rise from this point and so might do so this time.
(The fact that prices have already recovered in 2020 may seem like a sign of 'returning to normal', but according to the EMH prices have no memory so it shouldn't reduce the chance of them continuing to rise.)
I've reworded the post to clarify.
Actually I defined a crash as a fall of 20% or more in 8 weeks or less. So some crashes keep falling (e.g. 1973 in UK).
I think there's some merit in looking at the medium-term aftermaths of previous stock market crashes. On average (with large variation) they show strong rises starting a year after a crash, and continuing for more than a year; with a plausible general explanation (the worst damage has been done by then and remedial measures are being taken). This may be an underlying tendency on which other specifics of the current situation are superimposed (and some will of course already be priced in).
I've just written a post with more detail & pretty graphs.
Could be, but I don't know where else people would be likely to move their money to in the next year or so.
Glad you found it useful!
Incidentally something like the defence at the end has actually been used. In 2006, a Northern Irish terrorist called Michael Stone, only just out of prison, was charged with attempted murder after trying to force his way into the Stormont parliament building while armed with a gun and home-made explosives.
It seemed an open and shut case, but in court his defence was that, despite having all the ingredients of an act of terrorism, this wasn’t one at all, but a work of performance art - a mere simulation of an act of terrorism for aesthetic purposes.
As it happens, Stone was indeed quite a noted artist, having taught himself during his previous spell in prison.
Nonetheless judges ruled his testimony to be ‘wholly unbelievable’, and sentenced him to 16 years in jail.
I think Balofsky deserves credit for writing a very detailed case (albeit tl;dr), and responding in detail to the many critical comments. And it’s a shame it looks like he left LessWrong thereafter, perhaps as a result.
(FWIW I only came across this because I just read EY’s original post, and on a minor point knew that the claim that ‘the Old Testament doesn’t talk about a sense of wonder at the complexity of the universe‘ ain’t true. As Balofsky points out, the Psalms are chock full of this, citing it as evidence of God’s all-round wonderfulness.)
And Stockholm syndrome evolved (says evolutionary psych). Because clearly it’s in the woman’s (and her children’s) best interests to comply with captors & survive rather than rebel & be killed.
There were I believe only three major equities being traded back then - Bank of England, and a couple of others (can't recall - East India Company maybe), plus the South Sea Company soon after. The stock market continued to consist of a smallish number of large monopoly companies until the 19th century, when many more companies were listed.