No, they didn’t.

The markets are among the least volatile things in commerce.

EVERY trader looks like this, all the time. He could have just found out that his daughter got engaged and he'd still look the same way. "Crap, now I have to pay for a g.d. wedding."

Last Thursday, the Dow fell 11 points, which is a big enough story to lead the business news. Considering that the Dow opened the day at 12,037, that means it lost a crushing .09% of its value.

Granted, that means that at that rate, the Dow’s entire value would be worthless by May 2015.

By the same logic, the temperature in Fairbanks, AK was 85º on July 9 and -15º this morning. At that rate, by May 2015 Fairbanks will hit absolute zero, everything will turn solid and motion will stop.

These things are cyclical. Everything rebounds, and it usually doesn’t take that long.

The chance that 6 of the 7 biggest losses of all time would happen in the same 19-day annual period are 145,337 to 1.

Why was October 19, 1987, a/k/a Black Monday, such an outlier?

Two major reasons.

The market was unduly, maybe artificially high that morning, fueled by speculation that had kept the Dow rising all summer. The Dow was actually higher at the end of 1987 than at the start.

Also, it took the traders a while to get used to new technology. This was the first time that firms could program computers to take certain orders at certain prices. Not only that, but for the first time brokers could now process orders contingent on what level other stocks were selling at. A shareholder of railroad operator XYZ could order his broker to sell if railroad stock JKL fell to a certain price. We take this for granted now, but back then the traders were still only recently removed from executing every trade by hand.

What happened a week later?

Overworry. The traders were reeling from the previous week’s fall, plus all weekend long they were anxious to get to work and act conservatively – i.e. get into cash and not be part of the volatility. That works fine for one trader, but when everyone does it, you get the very volatility you were trying to avoid – the human equivalent of cows overgrazing on public lands, then ultimately going hungry.

Same thing. This one is attempting to negotiate with God, swearing to quit snorting coke once and for all if He'll only let the dry cleaner not notice the baggie he left in his suit pocket

What are the chances of 4 of the top 9 losses coming in the same 9-week period in 2008, during which we not only elected a new president, but had one of the two biggest ideological shifts in history between a president and his successor?

283,026,075 to 1. Almost the same as the chances of us choosing a person at random in the United States, and that person turning out to be you.

Does that mean we’re heading to an inevitable future of up-and-down stock prices? Not necessarily, and this will wrap up nicely with one more chart, below.

Look at the numbers. A 7% loss happens about once a decade. People frequently lose 7% of their savings balances – withdrawing $140 when you have $2000 in the account – and rarely feel aghast about it. How is that different than if it happens with any other investment (or in the case of the Dow, a representation of a mere 30 investments of the hundreds of thousands available)?

Oh, one more thing:

If you want to sell your position in a Dow index fund, and you’re worried that it isn’t at a high enough price, wait a couple of weeks.

Here are the top 20 advances and declines of 2010:

Just about every large movement (to the extent that these movements are large) is nullified by a comparable movement on the other side of the ledger. If this doesn’t convince you to buy-and-hold, and not obsess over daily market movements, nothing will.

**This post is featured in the cupid edition of the Carnival of Personal Finance**

and

**Baby Boomers Blog Carnival Eightieth Edition**