Last Updated Jul 14, 2008 3:24 PM EDT
Jason Zweig, in his debut Intelligent Investor column at the Wall Street Journal, had an interesting take - things aren't getting bad, but have been bad for a while:
We've been in a bear market for years; the Dow was almost 600 points higher in early 2000 than it is today. What about that 10% yearly return that U.S. stocks supposedly provide with near-certainty? To earn a 10% long-term return, according to Morningstar, you need to have bought at least 19 years ago and held on ever since.Does that mean despair? Nope, because he points out that in the bear market from 1969 to 1982, stocks returned only 5.6 percent a year - a loss of 2 percent annually after inflation - and then over the next 18 years they averaged 18.5 percent a year.
Success happens in the long run, and you can't get so caught up with the moment that you forget perspective. Advice that is good for the investor is also good for management teams, boards, and employees, because it's easy to get so focused on an irritation that you forget what else is happening. Oil prices are up â€" and that means people will want to work from home, online communications will need to temper some business travel, high tech systems could help corporations lower their energy consumption and cut costs. Businesses face global competition -- and who makes the systems that allow such scope of activity to exist? When pressure is on stocks, companies look to get more efficient, and technology is the piper that will demand payment.
As Zweig quotes Warren Buffet, "If a stock [I own] goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month." He gets to buy cheaper and build up his position for the next rise. Nothing goes on forever; otherwise, we'd all start inhaling and never stop until we popped. Retrenchment is a time to rid yourself of waste products and create the circumstances for using the next breath.
In 2000, the NASDAQ composite, home to many a high tech company, hit 5,048.62 and went down from there. Good. It was buoyed by insane expectations of businesses that said the days of needing revenue were history, and the growth was unsustainable. Today, the number is under half of that, which means there's plenty of room over the next few years for smart companies to take advantage of the current conditions and pick up more customers, business, and profit. Just ask yourself: what would Warren do? Invest and build.
Teddy bear image via Flickr user dionne_778, CC 2.0.