A good day to be away
Yowza!! That was one ugly day. I had no idea that the bill wouldn't pass. I thought it was a done deal.
This could actually be a good thing. It's a much more natural way for the markets to get back to equilibrium. It will be a shocker for a while, but eventually things will come back around. They always do. If you go back and look at the tremendous hits the market took in 1987, 1998, 2001, 2002, they look like mere blips on the screen. Someday this will be a blip as well.
But today people feel that the end is near. That can be good for the markets too. We've gotten way too cocky since 2003 and arrogance creates the problems that we are seeing in the market today.
My dad called me today worried that I was getting my buttocks kicked and destroying my financial future. I assured him that all my money was currently out of the market and that I was doing just fine. He asked me if this was the end of the stock market as we know it. I asked him if he remembered the crash in 1987. He said, "You know, I really don't. It must not have affected me that much, because I don't remember it at all."
As devastating as that crash was in 1987 (a loss of 40% on the DOW--20% of that in ONE DAY), when you look at the chart you can see that things recovered to where they were before the crash in just two year's time. The markets have a remarkable ability to heal themselves and even though everybody is saying "This time is different!", I really think that this will end up being an amazing opportunity to buy some really beaten up stocks on the cheap.
So even though the headlines are screaming "BIGGEST ONE DAY LOSS IN HISTORY", they are referring to dollars lost--not percentage lost. If we were to duplicate that October day in 1987 the DOW would have had to lose over 2200 points today.
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3 comments:
The 'blip' you refer to is causing real people, real suffering in the real world. Keynes' response to your type of complacency was to note that in the long run we would all be dead. The point being a lot of human misery took place before the 'blip' worked itself out.
Still up 22% YTD.
Equity mkts lost 1.1T on failure to pass 700B bill.
This bailout only bought some time for C, JPM, BAC and ultimately the USD.
I was up this am nicely, got a little cocky that the vote would pass, and bam, a loss. Also, was far to quick on trigger with EEV. The emerging markets are going to suffer much worse that the US.
I wasn't trying to be flippant when I compared this market to the one in 1987. I know a lot of people are getting hurt and that the market is taking its toll on everyone. My 401K is getting nailed just like everybody's.
My point was that we can recover from this. It will take time (maybe several years) but when there is fear in the market place, there is opportunity. I don't think that this is the time to give up and quit--yet.
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