MasterPo says: This blog is about topics and issues that are of importance to me. I am not one of the countless blogging lemmings that are tripping over each other scurrying down the hill and off the cliff of blogging oblivion trying to write the greatest blog on the latest topic de'jour. Your comments are welcome.

October 2, 2008

Dear Wall St. – The sky is NOT falling!

When I started this blog I promised not to be one of the robotic minions of blogger all chatting about the same thing. I’m going to have to diverge slightly from that promise for this article.

Yes, the stock market is down.
Yes, the dollar is weak.
Yes, oil is soaring.
Yes, trend line this, trend line that is going downward.
Blah, blah, blah.

Someone start handing out the Kool Aid!

But sheesh! If you read the articles from the Wall Street wonks and Yahoo Finance “experts” this is the End of Days for capitalism and the American way of life. In fact, one recent article on Yahoo Finance (“25 reasons to remain cautious” by Bennet Sedacca, posted 7/2/08) states as point #24 quote “The market is technically on the verge of breaking down”.

A break down?! This isn’t 1929! And this isn’t Black Friday either. Talk about fear mongering.

I’m not going to go point for point against that article or any other. I’m not a Wall Street financier, don’t have a Harvard MBA (much to the chagrin of my college ex- girlfriend (how’s life now baby!) ) and I don’t have a CFA (though I do have a CLU and ChFC). I haven’t a clue how far this drop will go, when it will stop much less turn around, and what stocks to buy to ride this out. If I did I’d probably be playing golf with Trump right now. Well, maybe not. I don’t like golf.

But my point is markets go up, markets go down. I know this is of little comfort to anyone who just saw a 20% drop in their 401k when they are retiring in 6 months. And to those who have and are loosing their jobs you have my sympathies as I have definitely been there too.

But this is not the end of the world. The market will recover!

I recall in the late 80’s walking to a Barnes&Noble and seeing row after row of books entitled things like “The Great Stock Market Crash of the 1990’s”, “Surviving the Depression of the 90’s”, and “How To Ride Out The Next Great Depression”. Each of those books (I skimmed through several) all said the same things basically: This time it would be different. This time the way the U.S. economy and world economy is the drop will be sudden, sharp, and we won’t recover for years – if at all. Well guess what? It didn’t happen! The 1990’s were a good set of years for investing overall (no thanks to Bill-‘I never met a tax I didn’t like’-Clinton).

In fact, in my years on this planet this is now the 5th recession I’ve lived through. And in all prior recessions the pundits and Wall Street suits all said the same things: This time is different because A, B and C; This time we can’t recover because of this or that; Foreign markets will cream the U.S. economy, and so on.

Same old same-old.

Keep in mind these 3 points:

1. It’s an election year. Especially for a Presidential election the markets are always jittery. Republicans usually mean less taxes and regulation while Democrats mean more taxes and regulation. The market doesn’t really care which in the long run but not knowing which side will win people can’t make long term plans.

2. Recessions come in cycles and we are smack in the middle of a down cycle. Check your history and you’ll see.

3. The soaring price of oil (gasoline) is a shock to the American society. Our society will adjust. But there will be losers. It’s a bitter pill to swallow on top of everything else. More on that in a future article.

This triple whammy may make this recession harder. But we will recover. And those who kept their heads will be riding very high.

Remember: Money is made in down markets. You just don’t know it until the market goes up!

I’ll pass on the Kool Aid.

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