Last week, with the Dow Jones Industrial Average at 9474, I was speaking with a colleague. She expressed her concerns about the state of the world and what the future may bring for her investments.
Her concerns are valid. They are also not new. Sure, the crisis of the day in 2002 may have a slightly different flavour than the crisis of the day in 1962. But, in the end, a crisis is a crisis when it comes to investment strategy.
In today’s environment it is easy to find reasons not to invest. In fact, throughout modern history people have come up with reasons not to invest. Every decade has been marked by events that have made people fearful for their investments.
All the way back in 1929 Irving Fisher, Professor of Economics at Yale, said, “Stocks have reached what looks like a permanently high plateau.” Dr. Fisher, it turns out, was very much wrong.
Going back to the 1930’s, with the Dow Jones at a level of 104, people were concerned about the Great Depression, the Spanish Civil War, and the beginning of World War II.
In the 1940’s, with the Dow Jones at a level of 131, people were concerned about the Fall of France, Pearl Harbour, post-war recession, and the U.S.S.R. entering into the nuclear age. In 1946, when the Dow topped 200, sceptics claimed, “the market is too high.”
In the 1950’s, with the Dow Jones at 235, people were concerned about the Korean War, the Suez Canal crisis, Castro taking power in Cuba, and the Russians entering the space race. In 1954, when the Dow topped 300, sceptics claimed, “the market is too high.”
In the 1960’s, with the Dow Jones at 616, people were concerned about the U.S.S.R. shooting down the U2 spy plane, the erection of the Berlin Wall, the assassination of JFK, and the escalation of the Vietnam War. In 1968, with the Dow above 900, sceptics claimed, “the market is too high.”
In the 1970’s, with the Dow Jones at 839, people were concerned about the largest trade deficit in U.S. history, the energy crisis, the steepest market decline in 4 decades, and staggering hikes in inflation, unemployment and the price of oil. In 1972, with the Dow crossing the 1000 threshold, sceptics claimed, “the market is too high.”
In the 1980’s, with the Dow at 964, people were concerned about interest rates being at an all-time high, deep recession, record federal budget deficits, and the Black Monday crash in October 1987. In 1983, when the Dow set the record above 1200, and again in 1986, when the Dow neared 2000 sceptics claimed, “the market is too high.”
In the 1990’s, with the Dow at 2634, people were concerned about the Gulf War, Irrational Exuberance, the Asia Crisis, and Y2K. In 1991, when the Dow crossed 3000, and again in 1995, when the Dow crossed 5000 sceptics claimed, “the market is too high.”
So far in the 21st century we have faced challenges just as daunting as those faced in the 20th century. The technology correction in 2000, the terrorist attacks of September 11, 2001, and the Enron debacle are all very real and very scary for investors.
Earlier I mentioned that the crises of 2002 would differ from the crisis of 40 years ago only in nuance, not in severity. The crisis of the day in 1962, with the Dow Jones at a level of 652 was the Cuban Missile Crisis, the closest the world has ever been to a nuclear war. Where will the Dow be in 10 days, or 10 months? I have no idea. But I have a pretty good idea where the Dow will be in 10 years. Throughout history the best time to invest has been 10 years ago. The second best time is today.