Yesterday’s frightening drop in the stock market was just that — just another frightening drop in the stock market.  Rejoice — we’ve been needing a 5-10% drop for a long time now.  Such temporary drops are essential for the long-term health of the market.  In fact, small-cap stocks are already in correction territory, and it looks like mid-cap stocks are rolling over as well.  Good!

Some fear it is the “October Effect,” thinking the market always drops during that month, which isn’t true.  Since 1929, October has been an up-month 60% of the time.  But, it has been more frightening.  Since 1929, there have been 91 days when the market rose or fell more than 6% in one day, but 23 of those 91 days have been in October.  I think we are still traumatized by the Great Crash in October of 1929 and the Minor Crash in October of 1987, when the Dow dropped “only” twenty percent that day.

I think yesterday’s drop reflected our knee-jerk horror of an Ebola pandemic in the United States.  No question, that would be horrific, but we are not exactly defenseless against it.  Would it hurt the economy?  Absolutely . . . for awhile!  Would it crush the stock market?  Yes . . . for awhile!

If anything, the failure of the Dallas hospital to connect the dots only makes it less likely to happen again in the future.  I remain much more concerned about the Russia/Europe problem than the ISIS problem, or the Secret Service problem, or even the Ebola problem.  My darkest fear remains a financial collapse from derivatives, and that has nothing to do with Ebola!