Updated: May 3, 2013 12:14PM
Originally published: October 8, 2001
The stock market closed down 684 points on Monday. Do I regret my patriotic gesture to buy 100 shares of America’s largest company--General Electric--on the opening trade?
Not one bit.
I made it quite clear that this was a decision driven by emotion, not my investment background. I wasn’t making a major change in my asset allocation. And I clearly said that my intention was to make a long-term investment--as well as a statement of defiance.
As trading started I watched GE open down nearly $4 at $35.50 a share. Mine was just 100 shares of the 2,713,500 that crossed at the opening price. Of course, the way the market works, there was a seller for every buyer. That means someone--a lot of people--disagreed with me.
One hour into trading I smiled with satisfaction, as GE traded at $37 a share. My broker called and asked if I wanted to take a profit! But I long ago gave up being a trader--and I had committed this stock to my retirement plan, saying I wouldn’t reconsider for at least two years. That’s a good thing. GE closed at $35.28 down 23 cents from where I bought it, and down $4.20 for the day.
Now, here’s where my head and my heart come together. Take a look at these statistics from Ibbotson, the research firm that tracks market history. They looked back at the stock market on four historic--and tragic--occasions. They were moments in our history that made us doubt the future of America and our entire way of life.
Yet in each case, after one year and three years, the stock market was substantially higher--in spite of the losses posted immediately after the event.
Pearl Harbor, Dec. 7, 1941: One year later the cumulative return of the S&P 500 was 20.3 percent. Three years later the cumulative return was 81.4 percent--even in the midst of fighting a world war!
President Kennedy assassinated, Nov. 22, 1963: One year later the S&P had gained 18.9 percent--and three years later showed a total gain of 20.9 percent.
Iraq invades Kuwait, Aug. 2,1990: One year later the market had gained 16.9 percent, and three years later there was a cumulative gain of 57.7 percent.
World Trade Center attacked, Feb. 26, 1993: Within a year the market was up 8.3 percent--and up 56.6 percent at the end of three years.
I’m a student of history--not a market timer. And those historic statistics give me confidence that my heartfelt gesture will prove to be a good investment. There might have been a better time to buy than on the opening today. Only hindsight will tell. As I noted, I’ll take another look in two years.
Until then, my 100 shares of General Electric will stand as part of my portfolio--all of which represents my faith in the future of America.
And that’s the Savage Truth.
Terry Savage is a registered investment adviser and is on the board of directors of McDonald’s Corp. and Pennzoil-Quaker State Co. Send questions via e-mail to savage@sun times.com. She appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast.