While the bear market continued for several years and many of my friends' dotcoms went under before they'd even found the best place to order pizza, somehow the ensuing months of depressed indices and falling averages felt more like the natural cycle of life; as if spring 2000 had been a huge earthquake and the next few years were aftershocks, mudslides, traffic jams. Difficult but not catastrophic. In the meantime, my portfolio stuffed with value picks was fine (but my dotcom, too, went bankrupt -- fortunately, several months after I quit, rendering my never-exercised options worthless).
Today, the market is down again. In lulls in meetings my colleagues check their Treos and report. Down 300. Down 400. As I finish a one-on-one confab, I hear: Down over 500 points. And I say, "it's not that big a deal." The DJIA was in record territory. A few months ago we whispered about record gains between meetings, we IM-ed each other with updates. Could it hit 12,000? It did, and kept on zooming up, up, record after record.
A 500-point drop today is nothing, not an earthquake from which to rebuild but more like a loud, spectacular thunderstorm that causes little damage. Full of sound and fury. Signifying: not much.
I take a look at some of my favorite stocks from October, right after the Dow reached 12,000. I said American International Group, Inc. (NYSE:AIG), which I thought was a good deal at $66.38. It's down today with all its brethren, but to $67.20 -- if you'd bought at the high, you'd be up, still. And Citigroup Inc. (NYSE:C) I liked under $50; today's price is a bit rich for my blood, bouncing between$50.75 and $51.00. And how about McDonald's Corporation (NYSE:MCD)? That was a great call on my part (I say, tooting my horn loudly). I told you it was a great buy at $41.39. It's down 3% today, to $44.35. Not exactly the stuff to jump off buildings over.
So don't sell your condo in Manhattan and head for an unplumbed cottages in the hills just yet. 500 points down, it's just not that big a deal.
Top growth fund manager sours on Apple, U.S. tech
New Facebook share structure hints at IPO
Before the bell: Futures higher ahead of housing, jobless data
Reader Comments (Page 1 of 1)
2-27-2007 @ 4:42PM
rob said...
panic will bring further decline,don't be a lemming!
2-27-2007 @ 4:48PM
THOMAS WOJTAN said...
I agree that today's historical drop is not even that "historical". Computer driven selling conibuted tO the "fall". Pure overreaction.
"Damn the doomsayers," they're weak and they're missing the big picture.
I see a modest correction and great buying opportunities in the near-term. I sold a slice of the pie today, ONLY to ante-up for the buying opportunities ahead. Press on ...
2-27-2007 @ 6:17PM
Aaron Johnson said...
Give me a break. a 9% drop is a big deal, otherwise it would not be front page on every signifigant news program. Must be blind or deaf not to realize that one.
2-27-2007 @ 9:20PM
rob lisle said...
it wasn't 9% it was closer to 3% and that doesn't make the top ten drops as far as percentages go
and if we used the "signifagant news programs" as a barometer, britney shaving her head was bigger news
2-27-2007 @ 9:40PM
B. Hellman said...
Perhaps you should pay closer attention to the television. DJIA dropped in the 3.3% range. I agree
with the "it was coming" folks. We have been on the best 4 year run in some time, a correction was in the cards. Just hold tight and watch for the buy opportunity.
2-27-2007 @ 10:35PM
Ray said...
I am locked into a 401k at work. They have prearranged choices. They are Life 2030 meaning one will retire in 2030 or there abouts. Stable fund, large cap, small cap, core bond, high yield bond, non-us developed markets fund, non us emerging funds and my companies stock fund. Bothe foreigh fund , both non) were kicking butt as well as small cap but today they and large cap went you know where. I don't know what to do. Should I let it ride. I am 47 years old and have about 175000.00 in the 401k. I only contribute 6 % to it as that is all my employer will match. I put another 20% into a Roth IRA that I opened in 1998 0r 1999. It is managed by a Dave Ramsey recommened broker and I do not know what it did today. I have 19% in Life Cycle 2030, 19% in stable value, 14% in non us developed markets fund, 20% in small caps, 27% in non us emerging markets fund and 1% in company stock. Any recommendations or thoughts welcomed.
2-28-2007 @ 12:05AM
reinharden said...
Ray, generally speaking if you're looking at 2030, just stop looking until 2020 or so. Then you can start to think about whether or not you should start worrying.
That having been said, classically speaking 27% in emerging markets is probably more exposure than you want to have. Assumedly it was more balanced originally and has outperformed your other investments. You might want to consider rebalancing. When you toss in your other 14% in non-US funds, you're at 41% foreign investments. That number is substantially higher than the traditional guidance.
Keep in mind that companies like AMD, INTC, and TXN are doing more than 75% of their business overseas. Even Colgate-Palmolive, Coke, Heinz, McDonalds, and Nike do more than 60% of their business overseas. So the largest American companies already bring substantial foreign exposure.
Now toss in your 41% foreign allocation and more than 50% of your portfolio is foreign-derived.
Anyhow...I'm not a financial adviser, but I'd think about that part of your allocation strategy.
reinharden
2-28-2007 @ 12:47AM
Tim said...
Ray, c'mon buddy its one day and you're talking about 2030? We're not looking at a catastrophic market crash here - the TV stations just want you to think that so they can boost their ratings. I bet in no more than a year or two you will look back on this day and wonder why you were ever worried at all. 401k options and the likes are pretty safe my friend, you don't sound like you're in anything risky there. Trust me - if you ride that out till 2030 you won't regret not making major changes that "day back in February 2007"