You heard it on the radio or from a friend at work. Here’s how I knew the market was “crashing” Monday. I was in a lead-lined hotel ballroom . . . well, OK, maybe not lead-lined, but the cell phone wouldn’t work . . . and someone was introducing the president, who was there to speak to what’s known as the Democratic Leadership Council — the group of democrats currently chaired by Senator Joe Lieberman from Connecticut. There were hundreds of people in the audience (funny how the president can fill a room), and when the introducer got to the part about “thirteen million new jobs, low inflation, low interest rates, a record stock market” — I saw the president lean to DLC founder Al From and make a wry comment.
I’m no lip-reader, but it was apparent he was saying something like, “not today, it ain’t,” or some such. I figured the market was down at least 300 points.
Leaving the ballroom of the Omni Shoreham after the president’s excellent speech, and panels on the importance of his fast-track trade negotiating authority now threatened in Congress (call your congressperson!) and the importance of improving public education (call for more charter schools!), I made my way to the pay phones, which were packed, and — giving up on that — to the room marked Gentlemen. It was packed, too.
The Omni is a nice old hotel, and in the room marked Gentlemen was an attendant flooded at that moment with business, playing the room like a cross between an old railroad porter and a performer at the Improv. “Yes, sir!” he announced to the crowd. “Welcome to the only place in this city where anyone knows what he’s doing.”
Eventually I got the word that the circuit breakers (brakers, really, when you think about it) had kicked in, and I can’t say I was feeling very bad about it, except for one thing.
(I wasn’t feeling very bad because no healthy market goes straight up; because the circuit breakers were a good idea that would give people time to think; because some people who have no business being in the market might be sufficiently scared by this mild jolt to get out; and because while I had clearly lost some paper profits like everyone else, I had also made some paper profits on my shorts — and I tend to see the bright side of anything. It’s just an annoying habit I have.)
The one thing that did have me feeling bad — anxious — vaguely guilty — was the nagging suspicion that it was all my fault.
You see, the last time this happened, October 19, 1987, when the market dropped that famous 508 points, I was in Detroit on a book tour, grinning like an idiot on the cover of a book called The Only OTHER Investment Guide You’ll Ever Need (don’t bother: out of print). The book actually tacked of the possibility of a one-day 500-point drop and suggested the market was cruisin’ for a bruisin’, though that was not by any means its main focus.
Anyway, ten years later almost to the day — last Thursday, to be specific — I was back “in Detroit” with another book about money (bother! bother! please, bother!), again grinning like an idiot (and again concerned by the height of the market, though this was not by any means the book’s focus). I was “in Detroit” in quotes because I was actually in Washington. But this was the day of my two live Detroit radio “phoners,” where one is, in every respect except reality, in Detroit. And down the market plunged 186 points . . . followed by 130 and change Friday . . . followed by Monday.
Call it coincidence if you like. But I’m still feeling vaguely responsible.
As for the Big Picture, it seems to me two things are at work here. The first is that the market was too high, the gains too easy, the psychology too complacent. And if the bounce-back becomes a snapback and all investors learn from this is heightened certainty that all declines are simply buying opportunities, and that the market will never really hurt them, then we might have a worse problem someplace down the road.
The second, though, is that most rational indicators are great. Inflation and interest rates — key factors in our prosperity — really are low, with little sign of a strong upsurge soon (though the tight labor market should not be totally discounted, and one day oil demand might again exceed oil supply . . . ). So that’s very good. And free trade (especially if you CALL YOUR CONGRESSPERSON TO URGE PASSAGE OF THE FAST-TRACK NEGOTIATING AUTHORITY EVERY PRESIDENT SINCE NIXON, I think it is, HAS HAD) is a big positive, as is our tremendous technological progress.
So there’s a lot to be excited about, just as there was last week. The difference is that the market, while perhaps still a good bit ahead of itself, offers better value than we’ve seen in . . . well, months. (Weren’t we just cheering ecstatically a few months ago when it got this high?) The real bargains, if you’re brave and you know what you’re doing, may now be in Asia.
Quote of the Day
The American Constitution is, as far as I can see, the most wonderful work ever struck off at a given time by the brain and purpose of man.~Gladstone
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