Investment lessons from the 1983 Diana Ross concert riot

Volatility returned to the US stock market in November. In the first week of the months, stocks surged 3.6% on the back of the first decent jobs report since May. Stocks fell 6 of the next 7 day over concerns about a weakening US dollar, inflation worries in China and concerns about the banking system of Ireland (Ireland? Seriously?) Just as bears began crowing about the indices "breaking through support levels" stocks regained composure and are now up 0.6% for the month, which is about a "normal" month's gain. In principal, markets are "efficient." In practice, the market seems ever more "inefficient," overshooting and undershooting fair value in ever shorter time frames.

We've been trying to understand what makes the market psychology schizophrenic, and we remember, of all things, the Diana Ross concert in Central Park in July 1983. Over 500,000 people gathered on the Great Lawn for an annual free concert (Simon & Garfunkel, the Beach Boys, the B-52's were acts in other years.) About 15 minutes into the performance, a terrible thunderstorm blew in, the sky turned black, lightning split the sky and over 2 ½' of rain fell in the next 30 minutes, which quickly turned the meadow into a swamp.

Read the entire commentary here.