Ken Fisher: Are Major Market Crashes Less Likely Today?
Ken Fisher discusses whether major market crashes and recessions are becoming less likely in modern times, acknowledging that while increased information access and computerization could enable faster responses and better problem prevention, there is insufficient empirical evidence to firmly support this hypothesis.
Summary
Ken Fisher addresses the question of whether 50% market crashes and recessions are less likely to occur today and whether recoveries might happen faster. He expresses skepticism about definitively answering this question, noting the lack of concrete evidence. Fisher identifies several potential mechanisms through which modern technological advancement could reduce crash severity: decades of computerization evolution have resulted in substantially more information availability, which might enable better understanding of underlying business problems and faster responses to emerging issues. However, Fisher introduces a counterbalancing concern—that increased information access might instead breed overconfidence or arrogance, potentially creating larger risks. He concludes that the fundamental problem is the absence of reliable historical data or evidence that can be firmly grasped to measure the truth of whether modern markets are indeed more stable, making it genuinely difficult to reach a confident conclusion on the matter.
Key Insights
- Fisher argues that increased computerization over decades has generated progressively more information availability, which could theoretically enable better identification and control of underlying business problems.
- Fisher suggests that greater information access might allow markets to respond to problems more quickly than in previous eras.
- Fisher presents a contrarian risk: that increased information and computerization might breed arrogance rather than better decision-making, potentially creating larger market risks.
- Fisher states there is no firm empirical evidence available to support claims that modern markets experience fewer major crashes or recover faster than historical markets.
- Fisher concludes that the question of whether major market crashes are less likely today is fundamentally difficult to measure and answer without reliable supporting evidence.
Topics
Transcript
[0:00] Are 50% market crashes and recessions less likely today? And might they recover faster? I don't think there's a way to know that. It is true that today, because of everything that's evolved over the decades in computerization, we have been getting more and more and more and more information. And maybe that means we know more about underlying problems in our businesses and how to fix them and keep them under control. Maybe it means with the more access to information that we can respond to things quicker. Maybe it means we just [0:34] know more. Maybe it means we're more arrogant. And so maybe that's a bigger risk. It's really hard to know because there's not really…
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