The Right Perspective

Two of my blog readers asked me to write about recent stock market behavior, though I particularly did not feel it to be worthy of comment. However, I am a sucker for requests, so here it goes... In a given month, the stock market is like an emotionally unstable woman unable to decide what she wants to do and often reacts violently at the slightest bit of news, no matter how trivial. This is not a sexist remark but having seen women on their emotional roller coaster, I cannot but compare the similarities with short term stock market behavior. This year is a case in point. After a good start in January, the equity markets tumbled in February, recovered again in Spring, then played dead for a short while, roared in early Summer, fell hard in late July and with the predictability of an emotionally distraught woman, made wild moves in either direction in August only to end the month almost where it started....and in the process, causing millions of heartburn tablets and anti-depressant pills to disappear off store shelves!

Let's take 'stock', shall we? As of Sept. 12, 2007 (the "day after" Sept. 11, 6 years ago, from which point forward the world was never the same), Dow Jones posted an 8.37% YTD return, S&P 500 posted a 5.12% YTD return and the MSCI World ex-US (International stock markets) posted an 8.07% YTD return in dollar terms. Hardly the performance one expects in a year described recently by some media analysts and popular finance reporters as "gut wrenching", "painful" and "illustrates the peril of stock investing".

I purposely chose the Sept. 11 reference because it is important to remember at this time, the truly catastrophic event that transpired in 2001. It is a day with personal significance for me as I lost one of my college classmates, who by a cruel twist of fate, changed his itinerary to be on the American Airlines Flight 11 that crashed into the North Tower of the World Trade Center. Six years later, as I remember his cheerful face, I often wonder if the present generation learned on Sept. 11 a new meaning for the phrase "catastrophic event", much like many families of the previous generation did during Vietnam war or as Japan learned during World War II.

I am not surprised that except for a few lone voices of sanity, the media has, predictably, sensationalized the stock market movements to the extent of routinely making downright silly predictions made by self-serving experts (possibly with short positions in the market), hoping to trigger mass hysteria to sell. I hope you are among the lone voices of sanity, staying the course and reminding yourselves that the recent turmoil is nowhere near any
"catastrophic event" in the stock market, such as the crash of 1929 or more recently, 1987 - both of which, by the way, barely hurt investors who stayed the course over two decades or more. So, have a "zen warrior" mindet to deal with the short term gyrations of the "emotionally unstable" stock market. If it helps, stop looking at your portfolio balances on a daily basis.

Friends, most of you are saving and investing for your own future and that of your loved ones, so please remember to put the wild market movements in perspective. I hope you all look back someday on the 2007 market movements as insignificant in a lifetime of fond memories and meaningful wealth created, a wealth that I hope you share and enjoy with your children, grandchildren or others less fortunate. Peace to all.