It's Not How Low But For How Long
By Dian Vujovich
Last Friday, Marc Shinbrood was standing around a craps table in Las Vegas when talk turned to not if—but when—the DJIA would close below 7000.
After the dealer announced that he had a bet the Dow would close at 6750 by the end of April, it didn’t take long before a few quiet bets were being made around the table. That’s when Shinbrood said the pit boss chimed in and said he’d not only take that bet for $5 but also add a second— that it would close at that level by April 1.
Shinbrood, a software consultant, kept his fin but was amused.
One day later, at a surprise birthday party for a close friend of mine, Marley Herring, proprietor of Marley’s Palm Beach Collection (www.marleyspalmbeachcollection.com) that “how-low-will-the-Dow-go” conversation began again.
Among her guests was a guy who at one time was pretty influential, locally. He predicted that the DJIA was going to fall to between 4000 and 5000 and “guaranteed” it. I asked if I might quote him on that forecast. At first he agreed then changed his mind.
I asked why he thought that and his answer was because of all the old and newly created debt we’ve got.
Just thinking about the Dow dropping to 4,000, or roughly 75 percent off its high quieted the room.
Shinbrood broke the silence when he said, “But the real question is not how low the Dow will go but how long it will stay at that low levels.”
Leave it to a software whiz to make sense out of the complicated.
And he is right. Instead of being freaked out by the market’s drop, when we put our smart hats on the bottom line is all about us and what our investing time frame is.
It took until late 1954 for the Dow to hit its pre-1929 level of 400, according to Yahoo— and was lower in 1932 than it had been since the 1800s.
So forget the bets. Big deal if you’re right. If we’re investors in the stock market what we all want is to make money. Period. And that takes time. Always has. Always will. How much time is the big unknown today but that’s been the case in good markets times as well as in bad.
Read the rest of the story at
http://www.nytimes.com/interactive/2009/02/20/business/0222-pay-graphic.html?ref=business and weep.
To read more articles, please visit the column archive.