Can We Just Get On With It?

After three quarters of grinding lower, it’s not clear the ultimate loss of wealth at the bottom of this market cycle will be the most painful aspect for investors.  Instead it could very well be the time it takes to get there.

We all expect the market to go up and the market to go down.  We’re conditioned to follow the well-worn mantra - “Investing isn’t about timing the market, but time in the market”.  That’s a great catch phrase for a logical philosophy but perhaps better suited to boom, rather than bust, times.  After all, how much time are we talking about - 5 years, 10 years, 50 years, or 100 years?  Here we are 75% of the way through the decade with a stock market that has delivered 14.3% cumulatively (as defined by the Russell 3000 index); or 1.8% annually – before taxes and before fees.  Perhaps we should have invested in Twinkies, canned apricots, frozen vegetables or cases of motor oil as the consumer price index (even arguably under-reported) has advanced 24.5% over the same time period.

What we’re not conditioned for, as families or as a country, is the prospect of reducing our long-term dreams based on diminished expectations.  Rethinking what it means to “retire”, or live a convertible life in old age as individuals and recalibrating our role in the world economy as a nation. Yet before this downturn’s run its agonizingly slow course, that’s what many citizens, and the United States as a nation, will have to face. 

Unfortunately this realization doesn’t come quickly for our leaders who are more apt to provide short-term props ad hoc to keep the inevitable at bay.  Ultimately, what purpose do the taxpayer rebates in the president’s “Economic Stimulus Plan” really serve?  Or accounting rules and guidelines that allow investment banks to defer financial losses on instruments that can’t be sold by terming them “tier 3” assets?  Far better to take our lumps and clean our closets today, even if it means stock prices decline a further 20-30% from today’s levels.  Over the long-term the end result may remain the same, but perhaps by taking our punishments now, opportunities for the long-term investor would be enhanced and increasing optimism for a prosperous future would instill confidence - resulting in higher stock market valuations.

Just a thought – but hey, what do we know anyways? 

In the meantime all eyes remain glued to this slow motion train wreck we call the U.S. economy and to the marvelous feats of frivolity administered by those in control.