Afraid of a bear market? Don’t time the stock market, grab a great book!
15 Sep 2018
Here at PII, our mission is to educate and inspire. I’m always thrilled when one of our other advisors comes up with a new idea for me, or puts a new article in my mailbox. Recently, one of our advisors, Casey Mushrush, gave me a copy of an August 8, 2017, Investment News article entitled “9 Bear Markets And The Events That Caused Them.” This article is a “top-ten list” of historical 20% or more drops in the stock market and what caused them. My eyes immediately jumped down to #6 on the list as John Waggoner writes, “Between February 1966 through October 1966, the Dow Jones declined -25.2%. The Go-Go Years hit a speed bump. The Federal Reserve warned in March 1965 that the economy was close to overheating. Treasury bill rates and the consumer price index began rising. The U.S. bombing of Hanoi marked a substantial increase in the Vietnam war effort.”
Where did the term the Go-Go years come from? Author John Brooks wrote a book titled “The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60’s.” John Brooks was considered the best business author in the country at the time, and the great Bill Gates still considers him his “favorite” business author. The book is very enjoyable, filled with stories about the state and popularity of the stock market in the sixties. A whopping 31 million Americans owned stock in the 1960’s (compared to only 4 million Americans in the Great Depression) and almost everybody from the house painter to the office secretary had a stockbroker. Before the decade of the 60’s was through, most Americans were fleeing the stock market. There’s even a story about former President Nixon trying to convince his secretary not to sell her stocks because of the price drop. I have always loved the quote by Warren Buffett about timing the stock market: “The only value of stock forecasters is to make fortune-teller’s look good!” When a market falls by 20% or more from it’s peak, it’s called a “bear.” The stock market has had 34 “bears” since 1900, that’s an average of 1 bear market every 3 to 5 years.
Since March of 2009, we haven’t come close to a 20% drop in stock prices. If you’re afraid of the next bear market, grab this great book!