In this solo episode of the No Days Off podcast, host Brian Gubernick examines the extreme volatility that unfolded over a single week, where the U.S. market swung more than 1,000 points, the VIX spiked over 50%, and the Japanese market experienced its worst day in decades. He argues that many panic‑inducing headlines are misleading because they hide the denominator – the base figure needed to interpret the magnitude of a change. Using concrete examples, he shows how a 1,000‑point drop from a 39,737‑point level is only a 2.6% decline, how a reported $1 billion retail sell‑off translates to just $13 per household when spread across 76 million stock‑holding U.S. households, and how a $1 trillion loss in the S&P 500 is modest relative to its $45 trillion market cap. Gubernick ties these statistical insights to a broader message: investors should focus on long‑term holding and develop staying power by understanding the true scale of market moves rather than reacting to sensational headlines.
Chapters
Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. So just last week, the stock market was insane. It was chaotic. Uh, last Monday The market fell, I think, 1,000+ points. People were going crazy, investors were going crazy. They saw some things happening over the weekend. You woke up Monday morning and there was already news about futures, you know, what we saw about to go on in the market based on what happened in Japan. And sure enough, chaos ensued. Then Tuesday came around and things looked a little better. We rebounded, and then Wednesday came around and it bounced the other direction again. And basically it was up and down and up and down, rather emotional, rather chaotic. And by Friday, we basically were back to where we, we started. So what happened, and how do we better understand what happened? There was a volatility storm. Is, is what we'd call it. And that happens when the market quickly turns into this chaotic blizzard of sorts, and strategists and experts, the pundits, start to try to explain what happened, and they have all sorts of predictions as to what's going to happen next. On last Monday, the Japanese stock market had its worst day in, I don't know, 30 years or so, maybe, maybe almost 40 years. As it fell like 12 to 13%. And so many believe the Japanese stock market had an adverse impact on the U.S. stock market. The Wall Street fear gauge, which is known as the VIX, V-I-X, it's an index of volatility. It shot up more than 50% to its highest level since the days of the pandemic at the very start. Then on Tuesday, Japan bounced up 10%. The S&P here in the US went up by a percent, and the VIX fell 28%. So by the end of the week, again, after going back and forth, we were basically where we started. Now let's talk around the analysis and some of the headlines, right? Because here's the reality: there was a stock market crash in 1929 There was a crash in 1987, yet no one really knows for sure what caused either one. Yet there's always these confident theories and there's all these confident headlines that are out there. Recently, some would say that investors lost confidence in the Fed and its ability to control or influence whether a recession's gonna occur. Or there was expectations from some of the big tech stocks that, you know, we— they missed the mark, they were out of hand. Or there was conversation again, Japanese stock market, but borrowing on the Japanese yen to buy U.S. stocks. It was just all this panic. But there's something we can look at that I find fascinating, something I just recently learned about, and it's pretty obvious when you say it, but you don't think about it in the moment. The explanation you know, the simplest explanation for what happened was that markets went haywire because, well, people are involved and crazy behavior is contagious. And we could take a look at what the Wall Street Journal had mentioned, which is understanding or better understanding the denominator as it pertains to specific headlines or fear that's being put out in the news. What do I mean when I say denominators? Okay, there's this technique that somebody that's marketing their opinion or broadcasting their message, this technique that some use intentionally or even unintentionally, it's called hiding the denominator. For example, you see a headline that says, the Dow Jones plunges more than 1,000 points. And that sounds really, really scary, but it hides the starting point of the decline. You've got to ask, actually, what's the denominator? So 1,000 points is scary, but what's the denominator? Well, the previous close before the market fell by 1,000 points was 39,737. So the denominator here in this case is 39,737. Now, on August 5th, the market fell 1,034 points. That would be the numerator. So if you do not divide the numerator by the denominator, the plunge, that 1,000-point plunge, really becomes just a 2.6% drop. Now, to be clear, a 2.6% drop is not small, but I'll tell you what, it feels a heck of a lot less alarming than when you read the headline, Dow plunges more than 1,000 points, because you become fixated on more than 1,000 because it's obviously a really, really big number. When the market, you know, a decade ago was at 15,000, and the market fell by 1,000 points, well, you know, that's a pretty sizable decline. You know, it's a 7% decline or so, right? But when you're at 39,737, 2.6% is a heck of a lot less. So we have to think about how we could redirect our attention to the denominator. And better understand the statistics. Here's another good example, right? There was a, there was a headline this past week, breaking news, JPMorgan, the bank, says that institutions bought the dip while retail investors panic sold aggressively. Retail sold a billion dollars worth of stock. So you've got your, your institutions, your bank— banks who are supposedly buying— and retail investors. You know, your average investor sold, you know, panically sold for a billion plus dollars, and institutions bought $14 billion. But let's look at the denominators for both retail investors and institutions, okay? 58% of US households own stock, either directly owning stock or through mutual funds or their 401(k) or whatever it is. But almost 60% of US households own stock. So the Census Bureau would count about 131 million households. So if you take 60% or 58% to be exact, Multiply that by the 131 million households. What you'll find is about 76 million US households own stock. So 58% of 131 million households, what we're saying is 76, just over 76 million people hold stock. Now, as JP Morgan, as their report estimated, these retail investors sold a billion dollars worth of stocks, a huge number. But when you math that out, a billion divided by the 76 million that own stock, what you actually find is that's an average of $13.12 per household. $13.12 per household. A billion dollars of stock sold amongst the households is $13. So what this is really saying is this billion, which is a huge number, it's really $13 in stock per household. Now, the median household owns about $52,000 in stock. So that means if JP Morgan's numbers are correct, on August 5th, when the chaos ensued, the typical US household sold about 0.025% of their total stock holdings. That's, that's, that's, that's 1/40th of a percent. So this idea of panic selling— see what I'm saying here? A billion dollars worth of stock sounds like a lot, but when you divide it out amongst 131 million households— or I'm sorry, 76 million households— what you find is that it's $13 a household. It's not nearly as big. Now remember, the $14 billion that JP Morgan and other institutions snatched up, right, like grabbed, is also next to nothing because they're so massive. You read the S&P 500 lost more than a trillion dollars on August 5th. A trillion dollars on August 5th. But nobody ever mentioned on August 5th that the total market value of the index of the S&P 500 was $45 trillion. So it lost a trillion dollars, but on $45 trillion before the, you know, before the drop occurred. So the point here is you got to understand how to talk back to statistics. As opposed to just assuming these things are massive. Let's actually do the math. Now, why am I talking about this, and why are we going so hard at this? Is a kind of a different episode, but I want to talk around this because we talk about staying power here at No Days Off. We talk about the need to be a long-hold investor and not a short-term thinker. And if you are going to hold for the long term, you've got to learn or understand how to weather the market ups and downs. And so the intention here today, in the, in the spirit of aiding you in weathering these ups and downs, is that we all better understand that what appears to be sizable, well, we've got to math it out a little bit and understand the denominator. Now it goes without saying, there's lots of places understanding the denominator plays, would play a role for you. Or would have an impact on you and/or your business. Sometimes when, you know, business goes up a massive amount or goes down a massive amount, is it massive? Or is it a small actual figure based on the denominator? Gotta run the math out on some of these things. That's the point. And in doing so, in doing so, ideally you're gaining a bit more confidence and understanding and have the staying power to reap the benefits of being a long-term investor. That's all we have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.
