Updated: May 3, 2013 12:14PM
Originally published: September 12, 2002
A year has passed, and much has changed. The financial markets are but one aspect of our memory, dwarfed by the loss of human life. How then to commemorate the anniversary of Sept. 11? After all, the terrorists attacked one of the most visible symbols of American capitalism and free enterprise.
Last year, to prove my personal belief in the system, I bought 100 shares of General Electric, the nation’s largest company, when the market reopened after being closed for four trading days. I called it both a patriotic gesture and an intelligent long-term investment, pointing out that the stock market had always rebounded from tragic events.
This year, I reiterated my belief in that system once again--and put my money where my mouth is. On Wednesday, I purchased another 100 shares of GE on the opening at $29.65 for my retirement account. And I fully expect that over the long run, it will prove not only a patriotic but a wise financial move.
After all, amidst challenges from outside--and from within--the U.S. stock market continues its role of providing capital to grow our economic system. Even in a serious bear market, there is no doubt that our market continues to function well. And that should give us faith in the future.
The investment’s track record so far
It was no surprise a year ago that the stock market fell sharply when it finally reopened on Sept. 17. During that day, the Dow Jones industrial average fell from its previous close of 9,605.50 on Sept. 10 to an intraday low of 8,883, rebounding slightly to close the session at 8,920, a decline of 685 points.
GE followed the pattern. The stock had already declined sharply from its all-time high of $60.50 in August 2000. On Sept. 10, GE closed at $39.25. When the market reopened a week later, the opening trade for GE was at $35.50, down about $4. My purchase was just a small part of the 2.7 million General Electric shares that traded at the opening that day.
Very quickly my gesture looked more patriotic than intelligent. My newly established GE position was an immediate loser, closing at $35.15. The next day it fell to $33.85. Within a week, GE traded as low as $28.50, as the Dow hovered at 8,062.
I received calls and letters from my column and television commentary on the subject. Some panned me for being naive; others applauded my patriotism. A radio commentator took me to task for leading people astray in the face of a certain bear market to come. One group of investment professionals razzed me for being a piker and buying only 100 shares instead of 1,000 or more. Even my broker, Peter Gottlieb of First Albany, called on Sept. 21 as GE hit its lowest level, asking me if I wanted to double up.
But by the end of the year, I was feeling much better. GE closed at $40.08--I had a winner--and the Dow ended the year at 10,021. I stopped thinking about it. This was a long-term investment in my retirement account.
That thinking hasn’t changed. The financial impact of the terrorist attack faded as the Dow retraced its way to over 10,600 in March. But by then the disclosures of corporate malfeasance hit the headlines.
The attack from within
The markets were attacked from within, and investors wisely hesitated to put hard-earned money into companies whose earnings they could not believe. The culmination--at least to this point--was a wave of selling in late July that took the Dow down to the 7,700 level--and GE down to $23.75 a share.
More recently, GE found itself in the headlines as well, for its extravagant severance package for former Chairman Jack Welch. The corporate governance guidelines have been changed from “strictly legal” to “strictly ethical.”
And that’s a good thing.
The changes in corporate governance enacted this year should give all investors a clearer sense that they have an equal opportunity--though not a guaranteed right--to profit from future growth in the U.S. economy.
That makes me more confident than ever in my two GE investments, as well as the other stocks I own. 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 firstname.lastname@example.org.