Sunday, November 23, 2008
The Last 10 Years - Gone
Take a look at the above chart (Click on it to see the full picture size). It is a picture of the S&P 500. On Friday, the S&P closed at 800 but it touched 740 intra-day. The S&P has been at this level twice. Once in 2002 and before that in 1997. Is this the real state of our world? Have we really made no progress in the last 10 years? Is this at all realistic?
It is hard to say. I'll be the first to say, I never thought we would get this low. I thought 850 was reasonable level for us to come back to. But we fell right through that and kept on going down. I knew this correction was coming. I knew it was coming for a very long time. In fact, I have been in a cash position for a LONG time because of this. When I transferred my 401K almost three years ago on my way to Microsoft, I left most of it in cash because I though the market was so overvalued. It is why I'm in such good position today to buy up assets.
But it is hard to imagine us right back where we started 10 years ago. The prevailing wisdom espoused by so many experts, including Warren Buffet, is that buy and hold works. It certainly did work when Buffet made his billions, but it has not worked if you have been in the market for the last ten years. Granted, if you go twenty years back, or you go ten years in the future, you might be OK. What do you think? Do you really think we should be at the same levels we were at 10 years ago? An age which just saw the explosion of the internet? An age where most people did not own a cell phone? Then again, it was the age when 20% down and 30 year fixed mortgages were the standard. So maybe we do deserve to be here.