Of Mirrors, Smoke and Scandal
On
the heels of the profound effect 9/11 had on the financial markets,
came another series of terrorist attacks. These attacks were
not well publicized. They were not even described by the media
as attacks at all. Yet, they had the same eroding and demoralizing
effects. These
attackers did not come from foreign lands but from the very heart
of our own financial infrastructure. Perhaps you’ll
recognize who these attackers were if I give you a few key words.
Tyco, Enron, WorldCom.
The intended
outcome of terrorism is to cause its victims
to have fear where they did not fear before. It hopes to change
the way those who have been terrorized think and behave. If successful,
it causes change in the everyday lives of the terrorized. It alters
perceptions of the future, bringing clouds of doubt and cold winds
that etch away at hope.
The great Bear
Market that began in March of 2000 has been fed and kept alive
longer
than its otherwise natural course, by the individual greed and
dishonesty of a very few highly placed executives in some of
the very companies that had earlier helped
to bring prosperity to America. As we were deceived and swindled
out of our money, some measure of trust in the stock market in
general went with it.
Uncertainty is like an unending winter
For investors,
there is nothing so chilling as uncertainty about the future.
Uncertainty
causes even the most seasoned investor
to shiver and worry. When investors are feeling unsure about what
is on the horizon, they stop adding money to the markets and, in
fact, pull it out at every opportunity. The 9/11 attackers were
quite successful in causing the majority of Americans to question
how bright the future might be. As much of the initial shock subsided,
we were then hit by a series of corporate scandals in 2001. This
wave of discovered dishonesty at very high levels blasted the markets
with more bone-shaking realizations of our financial mortality.
In my opinion, corporate misdealing had a more powerful and profound
effect on the markets than did 9/11. It just was not talked about
in the same terms, and we’ve taken quite some time to
get past the initial shock.
Take a look at this
chart of the Dow Jones Industrial Average. It was not until March
of 2003 that a significant come-back rally
was staged. At present these tremendous gains are being “digested” which
show on the chart as sideways prices.
Interestingly,
this very powerful 3 month rally has not been taken very seriously
by the media or the general population of even casual
market watchers. This unwillingness to give the markets credit
for making such gains tells me that the terrorists’ deeds
are still being successful in keeping us in a state of fear and
uncertainty.
Who
decides what “News” is anyway?
You may have
noticed that in the news, more talk of an impending market drop
has been reported than the reality of the market rise.
Many are still looking over their shoulders for the next disaster,
the next piece of bad economic news, or the next foreign policy
scare. Have you been one of these?
Here is a bit of good news
The good news
is you don’t have to keep worrying! The US
Stock Market has always gone up within any 10 year window of time.
If you are investing for the long haul, the times when the markets
are down actually provide you opportunities to buy shares of mutual
funds or stocks at discounted prices. If you are a trader (as I
teach), then you can make money whether the markets go up or down–it
doesn’t matter.
This all could
be a large example of the “glass half full
or half empty” scenario. When many see danger, you can be
sure that there is plenty of opportunity for those who don’t. |
