The Dow going down to 1000 isn't the end of the world. What can and probably will do it is the delisting of major companies that now populate the index. That is not the end but, yes, I do need to lighten up. Point taken.
The buy and hold philosophy held true for decades on the basis that if you bought and held stock in 1928 you'd have made out ok in the end. What was not spoken of is that less than 10% of the companies on the Big Board in 1929 were still on the Big Board in 1955.
To buy and hold successfully then, you'd have to have had 100% of all your stock holdings in the less than 10% of the stock on the board in 1928. AND you'd have to have been very patient, with no need for redemptions for a loooong time. Large losses are occuring now. More will follow. That doesn't mean the end of the world. It does mean the end of highly leveraged living and spending way beyond our means, individually and collectively.
What's going on now is not a failure of capitalism but of capitalist's having acted without regard for long-term shareholder wealth, or anyone's wealth for that matter but their own. It is also a failure of regulation, which is why better regulation, I hope, is coming. This is a cyclical phenomenon, but we're talking about a large time frame. So much excess has been laid out that only a deep correction will rebalance markets, worldwide, with the exception of some very uniquely positioned stock markets. Sorry, again, but the watering down of excesses is always painful and it will be no less this time.
Unfortunately, few people are educated on and even fewer lived through the excesses of the 1920's and the decimation of wealth in the 1970's.
It takes a long, long time to write all this down, and I do so regularly, but in the end your jobs and mine as pilots with national and commercial carriers has never been more threatened, along with the system of capitalism which, by the way, has not been discredited but brought to its knees by financial excesses the likes of which are only coming to the attention of an unwitting public now.
Amazingly, the US Federal Reserve is right now announcing the worst of the downturn as being behind us. That is so patently ridiculous it bears mentioning that in July 2007 the very same Fed was also saying we were in the "best times in the best market EVER!". Do a search, you'll come up with the headlines in the major periodicals and newspapers at the time.
That some can say without batting an eyelid that the current turmoil was unpredictable is disingenious at best, scurrilous at worst. Reams of data and comment from those in the know were warning about what will happen, and that which is now happening. These are not trenchcoat-wearing denizens of a some mythical spy novel I'm talking about but actual economists AND market forecasters. You just weren't listening, as you're not listening now.
Of what to do, precisely, is difficult to answer. Positioning oneself now is not too late. In fact if you're actually invested in the markets then now, right now, is the best time you have left to get out. It is not a return of the bull market of yore. Forget the gains you might recover if you hold out another week, fortnight, month, for the markets will not move against the major trend much longer. Get out now, park your money in cash and stop spending.
Cash you say? But what of the all but negative return? Sorry, again, but this is a situation where you should consider the return of your money first, and the return on your money second. But of course, no-one reading this will do so.
I was asked by a reasonably well off, counting millions, pilot colleague what to do with his investments. Yes, there are those fellows about. He almost sold his entire holdings in July 2007 but was waylaid in ringing his broker. Since then he has watched his 401k TANK!!! yet is still fully invested. He hasn't sold a thing and in fact has added to his position since by utilizing that insane perspective of dollar cost averaging. Paralyzed by indecision and inaction.
When I patiently explained, as requested, why we are where we are, he nodded sagely but we have seen nothing acted on. The reason is simple, and he admits it. "If I did so now", the logic goes, I'll lose around $x. That's too much to bear and as his voice tails off he adds a final plea that "maybe it'll go up?"
Hey, lighten up.
