My "Occupy Wall Street" Moment
Confessions of a mediocre investor.
Gerry Boughan | dreamstime
Now here is a protest, as described by The New York Times, that most of us can love:
“A loose-knit populist campaign that started on Wall Street three weeks ago has spread to dozens of cities across the country, with protesters camped out in Los Angeles and City Hall, assembled before the Federal Reserve Bank in Chicago, and marching through downtown Boston to rally against corporate greed, unemployment, and the role of financial institutions in the economic crisis.”
Yes! Blame someone! Heads must roll! And, incidentally, take the heat off the press, liberals, the Tea Party, Washington, broken schools, Hollywood, and cholesterol.
This is like rallying against spam. You gotta love to hate it.
In a previous incarnation of this column called “Memphis Money,” I wrote about stocks and ran an investments contest for local brokers. I emphasized that I was only an informed consumer and not an expert, but a good friend of mine, Larry Bloch, had a pretty good idea of my net worth and thought this was funny, which in a way it was.
It was also a lot of fun. Purely by coincidence, the timing was perfect. The contest began when the Dow Jones Industrial Average was around 3,500 and ran five years until the Dow was over 9,000. The winning contestant each year picked five stocks that usually doubled in value. Sometimes the runner-up did too, although one year the research director at a local firm finished last and lost money. Anyone could play the market and achieve returns that would buy cars, kitchens, and college educations. I did it myself a couple of years in my “dartboard portfolio,” selected by blindly stabbing a pencil through the stock pages of the newspaper.
Brokerage firms churned out “wealth calculators” that let customers choose a “conservative” strategy with an 8-percent annual return or an “aggressive” strategy with a 12-percent return. Heck, corporate bonds and U.S. Treasury bills paid 7 percent or more. It was so easy.
So we thought. After the contest ended, the market continued upward after dips following the bursting of the dot-com bubble and 9/11, reaching an all-time high of 14,164 in 2007. Despite losses, stupid decisions, and bad timing, many of us really did buy kitchens and college educations with the help of our market winnings.
I bring up these happy days as a reminder that we were a little bit crazy. Thirty years ago, the Dow was below 1,000, where it had been for most of the previous decade. Then, over a span of 15 years, it quadrupled. For those of us brought up on “the rule of 7 and 11” (money doubles in 11 years at 7 percent and in 7 years at 11 percent), this was heady stuff.
We got our comeuppance, of course, in 2008. Those optimistic wealth calculators were replaced by grim jokes about 401(k)s becoming 201(k)s.
Things could be worse, unless you are among the unemployed. As I write this, the Dow is around 10,500. Anyone who bought and held an index fund in the 1980s and the early 1990s is probably still ahead of the game. If, on the other hand, you bought into the hype of Dow 30,000, you are quite possibly poorer for it.
I have a feeling that if I toted up all my gains and losses in stocks and bonds over the last 30 years, including the ones that doubled and the ones that went to zero, I would have an average annual return of about 5 percent, slightly above inflation. The last three years have been awful. Baby boomers like me still have some time. Our children got through college. We fixed our houses. If we’re lucky, we have our health. We have more stuff than we need.
The Michigan writer Bruce Catton quoted these lines of unknown authorship in his book Waiting For the Morning Train: