Efficient market proponents argue the market has no memory, that every day is independent of the previous, like each roll of the roulette ball. I believe the market does have a memory based on the cumulative memory all the current market participants. My memory seems to focus on all my losing trades which I can recall with intense detail. The '87 crash is probably in the market's memory since many now trading lived through that first-hand. Maybe the 1970s bear market is part of its memory, but I doubt the '29 crash or the 1930s or 1907 panics are in its memory. The last six months will be remembered by the market for a long time. This will add some risk premium for those who like to trade from the long side.

I have always like this quote from William Faulkner: “Memory believes before knowing remembers. Believes longer than recollects, longer than knowing even wonders.”

Like a lot of Faulkner, the meaning shifts every time you read it. It takes us a long time to understand our past.

Vince Fulco writes:

It is tough to imagine the older worker ants represented by the baby boomers gravitating back to equity markets after being burned so badly twice in a decade. Particularly since in this downleg, perceptions have grown that contractual obligations have weakened so dramatically. Thinking about the creditworthiness of long term disability and life insurers specifically. Perhaps some of the 'fool me once, shame on you…' mentality will creep in too.





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