The Tokyo stock market on November 6th was quite turbulent. The Nikkei Stock Average continued to fall significantly, closing at 57,434.77 yen, down 3,643.13 yen (5.96%) from the previous day. This was the third-largest drop in history, falling below the 60,000-yen mark for the first time in about half a year.
The trigger was the Democratic Party’s landslide victory in the U.S. midterm elections. Concerns spread that regulations on AI (artificial intelligence) would be tightened and that capital investment, such as data center construction, would slow down. AI and semiconductor-related stocks, which had been driving the market until now, are now leading the decline. The situation is taking on the appearance of a global stock market crash.
However, the election results do not necessarily mean an immediate deterioration in the performance of AI-related companies. Rather, the market’s view on future regulations and investment trends has changed.
There is a saying I remember at times like this.
“Half-price, 80 percent, 20 percent off”
It is a long-standing market adage.
What is “Half-price, 80 percent, 20 percent off”?
“Half-price, 80 percent, 20 percent off” is a phrase that indicates how far a stock price might fall when it drops from a high.
The calculation is simple.
First, it becomes half-price. That is 50%. From there, 80% of that. Then, 20% off, which is 80% of the previous amount.
0.5 × 0.8 × 0.8 = 0.32
In other words, it means it could fall to 32% of the high, or roughly one-third.
If a stock price was 10,000 yen, it would be 3,200 yen. For an investment of 1 million yen, the valuation would be 320,000 yen.
Of course, this is not a prophecy that it will fall that far, nor is it a guarantee that it will definitely rebound if it drops to one-third.
There is no mathematical necessity to this saying.
Originally the wisdom of merchants
What is interesting is that this phrase did not originally originate in the stock market.
It is said to have been used by medicine wholesalers and textile wholesalers in Osaka as a guideline for discounting items that would not sell.
The price of a product is not determined solely by the price the seller desires. If the buyer does not purchase it at that price, the product remains unsold.
It doesn’t sell at half-price. It doesn’t sell even after further discounting. In the end, there are times when it must be lowered to about one-third of the original price.
Merchants must have accumulated such experiences over time.
Eventually, that wisdom was brought into the stock market as well.
When you think about it, stocks and commodities share the common trait that their prices are determined by the relationship between supply and demand.
However, in the case of stocks, expectations for the future significantly influence the price.
If a company’s performance is expected to improve, its stock price rises. However, if those expectations are betrayed, the stock price begins to fall even before the performance actually deteriorates.
Stock prices incorporate not only the current value of a company but also people’s expectations for the future.
Forgetting when it rises, panicking when it falls
The stock market has a strange quality.
When stock prices are rising, it starts to feel like they will keep going up forever.
“This time is different,” “New technology will fundamentally change the economy,” “It cannot be measured by traditional yardsticks.”
These phrases have appeared repeatedly during past stock market rallies.
The same can likely be said for the current AI-related stocks.
Of course, it is entirely possible that AI will significantly change the future economy and society. The problem is that the fact that a technological innovation is genuine and the fact that the stock prices of related companies are appropriate are not necessarily the same thing.
There is no doubt that the internet changed society significantly. However, during the IT bubble around 2000, the stock prices of many related companies plummeted.
Correctly evaluating the future potential of technology and purchasing stocks at an appropriate price are separate issues.
Conversely, when stock prices begin to fall, it starts to feel like they will fall indefinitely.
The market, which was optimistic until yesterday, suddenly turns completely pessimistic.
Looking back at economic history, this human psychology has been repeated many times.
What market adages teach us
I do not consider the adage “Half price, eight-tenths, twenty percent off” to be a phrase for predicting the bottom of a stock price.
Rather, the lesson lies elsewhere.
It is that humans tend to think the current situation will continue more than they realize.
When stock prices are rising, we think they will continue to rise, and when they are falling, we think they will continue to fall.
However, the market does not move according to human expectations.
Moreover, for a fallen stock price to return to its original level, a rate of increase greater than the rate of decline is required.
For example, if a stock price falls by 50%, a 100% increase is needed to return to the original price. For a stock that has fallen 68% to 32% of its value to return to its original price, a 212.5% increase is required.
Recovering losses is much harder than one might think.
That is precisely why one must be cautious when the market is performing well.
What is important in investing is not just how much you can earn. It is also about considering how much of a loss you can withstand.
History does not repeat itself, but…
When studying economic history, one becomes cautious about simply superimposing past bubbles or panics onto current events.
The Great Depression of 1929, the Japanese bubble of the late 1980s, the IT bubble around 2000, and the 2008 global financial crisis. Each had different backgrounds, financial systems, and policy responses.
History does not repeat itself in the same form.
However, there is a common structure in which excessive expectations for the future drive up prices, and the correction of those expectations causes prices to plummet.
I feel that the phrase “Half price, eight-tenths, then twenty percent off” left behind by merchants of old contains a warning against such human psychology.
Whether today’s stock market plunge will end as a temporary correction or mark the beginning of a full-scale decline, no one knows.
The only thing that can be said is that the more enthusiastic the market is, the more important it is to keep your distance from that enthusiasm.
Half price, eight-tenths, then twenty percent off.
It is quite a frightening phrase, but it is worth remembering.
Reference
*Stock prices are based on the closing price as of November 6, 2026.