Timing The Market

The market is a peculiar beast. One day, the news is so good that prices seem to rise like the ocean tide. However, the next morning, the inflow races out like sand in an hourglass. During the early 70’s, I remember listening to the evening news. The broadcaster would speak for an eternity, but the one thing that always caught my attention was when he said, “The Dow Jones closed at 832 up 3.35.” The numbers were always under a thousand from what I remember back then, but once in a while it would shoot up for reasons I did not know. Back then, there was no CNBC, Bloomberg or the internet. All I knew was that, for some reason, the prices went up and down. During those early years of my life, I can remember hearing about oil embargos and the war in Vietnam. Also, who can forget the constant talk about the Gaza Strip and Lebanon. I had no clue that all of that conflict and confusion was also what drove or stalled the markets.

Every once in a while, I heard about bear markets. I had no clue what a bear market was, however, I knew it was somehow bad and the prices were going to be going down. Heaven forbid the words  “crash” or  “recession” made there way into the nightly forray- that was considered taboo for sure. At the time, I had no clue how close in history the Great Depression was from my existence. It always seemed like something that happened so long ago. I had a little bit of a connection to it though, because, my parents were born at the beginning of the greatest depression this country ever saw. I heard all the stories about the onion and potato dinners. Now that I think about it, I only remember dinner being mentioned- I wonder why? Things must have been tough. But they never seemed to complain. I guess when you know hunger and abject poverty at such a young age, you can truly appreciate the things that a lifetime of work can bring.

As the years went by, I remember being in high school and listening to that same guy on tv. Only at this time, I can hear him saying, ” The Dow closed at 1850- up 25 points.” Only about 10 years in the future but the numbers were doubled. Through all those wars and oil embargos, the markets made there way higher. At some times, it was a viscious roller coaster ride, but given time, the market marched upward. In those 10+ years, there were times where the bottom seemed to fall out, but after the dust settled, great companies selling great products increased their sales and earnings and were rewarded for it.

Looking back from this point in time, the same basic scenerio has played out over the last 30 years. Only in those years, the characters had changed. Sadam and Bin Laden were all the rage. Iraq became the new Vietnam. By the way did Vietnam become the new Korea or WWII? Anyway, you get the picture. Everything seems to repeat itself. Our history is just a collection of human events that taken in context seem very different, but upon closer examination nothing has changed. People are still fighting and wars are still being waged and heros and villains are made and dethroned almost everyday.  All the while, great companies have been making great products and increasing revenues and earnings. Now the Dow stands at 17000 and some change. From where I first remember hearing the word “Dow,” the DJIA has multiplied over 17 times—1700%! That is amazing. Without reinvestments or day trading on an ongoing basis, the value of the Dow has increased 1700%. I know that some of the components have changed and index funds have not followed the progression exactly. However, in the whole scheme of things, timing the market might have been a fools game for the vast majority of investors. I wonder how much wealth was lost to the average investor who sold at the bottom only to be transferred the the wealthy who eagerly gobbled their unwanted shares up? It truly is a peculiar beast.

Anyone have some of the same memories? Have you ever timed the market correctly? Have you ever timed it incorrectly?

Robert the DividendDreamer