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Market's strange anniversary

Traders floor New York Stock Exchange reflect fear thgripped Wall Street Sept. 29 2008 day markets lost $1 trillion. It

Traders on the floor of the New York Stock Exchange reflect the fear that gripped Wall Street on Sept. 29, 2008, the day the markets lost $1 trillion. It was just the beginning -- but we survived it.

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Updated: May 3, 2013 12:15PM

There's a kind of masochism in "celebrating" the first anniversary of Wall Street's collapse. Yet that's what the media have been busy doing these last few weeks -- recounting the scary stories of Fannie and Freddie and Lehman, along with Congress' rejection of the original $700 billion bank bailout, and the day the market lost a trillion dollars -- Sept. 29, 2008.

Funny what a little perspective does for you. Even $1 trillion seems cheap in hindsight! Why, that's only half our federal budget deficit for this year. It's only a drop in the bucket compared with the losses that came after that day, not only for stocks investors, but for real estate owners. Now we're used to talking in trillions.

October has been a notoriously volatile month, home to the stock market crashes of 1929 and 1987, along with a memorable 554-point drop Oct. 27, 1997. October hosted huge stock market declines in 1978 and 1979, as well as the "Friday the 13th" collapse in 1989. And then there was 2008!

But we survived all of those market declines, and we're here to talk about it. There's a lesson in itself. In spite of the losses of the last few days, the Dow is now down slightly more than 10 percent from 52 weeks ago -- but up nearly 50 percent from its 12-year closing low of 6,547.06 on March 9. And it's still up nearly 10 percent year to date.

Market lessons learned

In fact, although hindsight is 20/20, it might be worth a look back -- if only to impress upon ourselves the lessons we learned, or should have learned, from the incredible year we've been through. And to keep from making those same mistakes in the future.

If you were one of the people who "gave up" and sold stocks in the gloom of last winter, you may be feeling a little foolish these days. But the real question is: What will you do during the next decline?

If you were panicked into paralysis, you didn't suffer so much in the end because the market did rebound. So will you sit tight through the next crisis -- or be quicker on the trigger?

If you were following a market timer, will you be renewing your subscription? Jim Stack of InvesTech Research loudly called the bottom in his March 13 issue, and his positive comments were reported in this column on Feb. 9. But few others have come forward to proclaim their success.

And -- be honest now -- did you fall victim to your own panic, selling when things were darkest in February? Have you bought back into the market since? Are you cursing your own bad timing?

If you were "diversified" and everything fell apart, does that shake your complacency about asset allocation for the future? Or have you sorted through the alternatives -- including cash or "chicken money" so you're prepared for a return of volatility, or another steep decline?

The big picture

There will be another decline, of course. It may even be starting now. But if you're planning to retire in America, you'll be much better off investing in America. Remember, going back to 1926, there has never been a 20-year period where you would have lost money in a diversified portfolio of large company stocks, with dividends reinvested. Even adjusted for inflation.

Sure, the economy appears gloomy, with bankruptcies and foreclosures and unemployment all rising. But we've gotten through tough times before. It's just that most people under 50 have no memory of the 1981-82 recession, when inflation was 13 percent, unemployment over 11 percent and the prime rate hit 21.5 percent!

Back then, the Dow Jones industrial average was around 800 -- and no one was predicting a technology boom that would take the Dow to nearly 15,000 in the next 20 years. If you sold out back then, in the midst of that steep recession, just think of the gains you would have missed. Will our next boom be based on something equally unexpected -- arising out of nanotechnology or a newly invented energy resource?

As this October anniversary rolls around, it's interesting to note that the media tend to commemorate the most shocking and negative events. Most people want to celebrate only the happy times -- birthdays, anniversaries, accomplishments. It's in our nature to be optimistic, to believe better times will come. They will. And that's The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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