I first came across the title of this memo in an article titled “Why This Market Cycle Isn’t Different” by Anise C. Wallace in The New York Times of October 11, 1987. It went as follows:

The four most dangerous words in investing are “this time it’s different,” according to John Templeton, the highly regarded 74-year-old mutual fund manager. At stock market tops and bottoms, investors invariably use this rationale to justify their emotion-driven decisions.

Over the next year, many investors are likely to repeat these four words as they defend higher stock prices. But they should treat them with the same consideration they give “the check is in the mail. . . .”

Nevertheless, in the bull market’s sixth year, the “this time it’s different” chorus is beginning to be heard. Wall Street professionals predict that, before the bull market ends, individual investors, who have mostly stayed on the sidelines, will be swept along in the mania characterizing a market peak.

They will invest in stocks despite the fact that the Dow Jones Industrial average has more than tripled in the last five years. They will be hearing overwhelmingly compelling reasons why stock prices should go higher, why the bull market should last considerably longer than any other in history, why this boom will not be followed by a 1929-like crash and why “this time it’s different.”

Many of these arguments will be tempting because they will have some element of truth to them. Even Mr. Templeton concedes that when people say things are different, 20 percent of the time they are right. But the danger lies in thinking that the different factor – like the recent investment in United States stocks by the Japanese – will be uninterrupted.

Wallace’s essential message is that investors must take heed when the four words are in widespread use. Why? Look back at the paragraph introducing the above quote: when you first read it, did you happen to notice the date of publication? It was just eight days before Black Monday (October 19, 1987), the worst day in stock market history. We know how bad it feels when the market falls 20% in a year. Try 22% in a day!! Wallace’s warning was particularly important at the time the article was published, but for me it’s always important.

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