Gettin' Down with the Dow - Ow!
By terrymckenzie on Oct 27, 2008
Last week was not pretty. It started off with our pre-announcement of earnings, and was followed by a downgrade and incorrect reporting that co-founder and employee #1 Andy B was leaving Sun. Like we needed that this week. As my boss, Bill MacGowan, said, "What next? Bird flu?"
Well, if misery loves company, we have lots of it. I can't tell you how many of my friends have been laid off from jobs, or who are struggling in their own businesses to find enough work to keep going. And looking at your 401(k) these days takes courage. When our financial adviser cheerfully chirped at us that we had lost "only" 18 percent of our savings - and our faces lit up - he quickly added, "Of course, that was just through September." Oh. In other words, we've lost half of our savings, along with everyone else. Great.
This downturn is going to be ugly, and it's going to be long, methinks. The party was really fun while it lasted, but the hangover is going to be a bitch. Being pretty conservative in our finances (or maybe just lazy), we didn't make any bold moves during the good times. Which means we didn't make tons of money when the going was good. But we have less to recover from in that vein, too. I consider us very lucky. Even so, we're tightening our belts and waiting to see what happens. Like everyone else.
So consider this. Years and years ago, when the Dow was at around 2100 (that's where it closed at the end of 1987), we had a stockbroker friend who sported the following license plate on his car:
We all thought he was crazy. How could the Dow get to 3000? The Dow had been around 2000 for a long time. But he was a smart guy. And the Dow started to rise, first hitting 2500 and then, to our astonishment, passing 3000. Then 5000, 7500. It hung at below 10,000 for awhile, as that seemed to be a psychological tipping point. But yes, the Dow roared past 10,000. A year ago it was 14,000. Remember?
One more memory for you. During the dot.com days, I clearly remember cabbies giving me stock tips. And I remember thinking, "Oh yeah. This boom is over." And it crashed hard. Now this time around, I didn't have cabbies giving me "can't miss" stock tips. But we did have friends buying pretty amazing houses for huge amounts of money. We'd look at our nice but not deluxe house and wonder where we went wrong. We did idly wonder how folks could afford those houses, but hey - that was their business. None of us had any idea of the housing disaster that was building under all of us.
So trust me. Losing a big piece of our savings is very, very bad. But we didn't lose our house - and won't, because we've lived here since 1985 and have managed to pay the mortgage off. I fully recognize that we are blessed. And my heart goes out to those families who have lost jobs, homes, health care. Something has gone very wrong, and we'll all be paying for those mistakes for years to come.
Let's just hope our prescient friend who predicted Dow 3000 isn't still using that license plate. It was a lot more fun rising to 3000 than dropping to 3000 would be.