Fear and Loathing on Wall Street

The greatest danger for an investor is not the crash but what comes after.

Charging Bull by sculptor Arturo Di Modica

As we anguish over trade war with China or nuclear war with North Korea, we also worry, is it time to take profits on our stocks and watch Armageddon from the sidelines? Get out? Stay in? What to do?

But there is a compelling reason why selling out of fear is the worst choice of all. The backstory of the bronze bull sculpture by Arturo Di Modica in Lower Manhattan explains why.

The famous landmark features among the most popular selfie posts on Instagram. But the bull’s ungenerous welcome when it was first installed is a lesson in perseverance and steadfastness in the face of a crisis. It showed Wall Street power brokers that bulls don’t back down.

A hard core New Yorker, Di Modica created Charging Bull after the 1987 market crash as a Christmas gift to “the American people.” It turned out to be an unwanted gift or, at least according to the New York Police Department, a hunk of guerrilla art, so called because Di Modica placed it without authorization. The beast was unceremoniously impounded and hauled off to a lot intended for drug contraband and stolen cars.

Sculpting the bull was only the first of Di Modica’s many challenges. Crating and driving it to Lower Manhattan was next. The bull weighs in at 7,100 pounds and measures over 11 feet by 16 feet. Compare that to a Cadillac Escalade at 5,900 pounds and 17 feet by 7 feet, and you get an idea of the lengths the sculptor went in order to get his bronze bull onto a crowded city street.

A public outcry after its removal led to a rethinking by the grandees at the New York City Parks and Recreation Department, which reinstalled it at Bowling Green on December 21, 1989, where it still stands — or stomps — today.

There is an interesting parallel in the giant bull’s return. When the stock market throws you out, don’t get even, just get back.

For most investors, the crash of 2008 was a far greater disaster than the one that inspired Charging Bull.

When the market found a bottom on March 5, 2009, closing at 6,594, the inglorious fall was inspired by equal parts fear — from the fall of Lehman Brothers — and loathing, as Congress turned up its nose at the so-called bank bailout bill. The total loss was a staggering 7,570 points or a 54% drop in wealth, down from the previous high of 14,164. Ouch, right? The smart play was get out and hide until it was safe to come back, right? Sadly, for those nerve-wracked investors who did, the bigger existential crisis was yet to come.

The bear market only lasted through 2009 and was followed by the biggest bull market in history as the Dow Jones average rebounded. By mid-May the S&P 500 was up 30% and over 60% by the end of the year. In 2013, the stock market fully recovered. The Dow went on to set over 250 closing records until February 2018, when it peaked at 26,115 on January 26.

From the low during the crash, the total gain in the Dow was 19,521 points. If you played it safe, sold out at the bottom, and stayed on the sidelines you held onto 46% of your stock market wealth. But if you suffered in silence while taking massive short-term paper losses, you ended with a gain of 337%.

The conventional wisdom is that the worst investing mistake is to buy at the market top. But it turns out the bigger mistake is allowing our emotions to take us off course when things look so dark we can barely see.

Charging Bull reminds us, down markets are downright scary, but if we face them without flinching, we will return to glory.