I just got my Master Practitioner Strategist Certification in Neuro-Linguistic Programming, which teaches me all kinds of wonderful facts that I will continue to share with you for the weeks and months to come. For example, did you know that information flows into our minds at a rate of 2 to 4 million bits per second, yet we can only process 134 bits per second? This means that the abundance of information floods our minds at a rate similar to that of water gushing out of an open fire hydrant. We “filter” what really comes to mind by eliminating information that doesn’t make sense, skewing and / or generalizing information based on our beliefs.
With that in mind, and a few facts to back it up, I want to assure you that over the last 3 weeks the media has been over-generalizing and grossly skewing almost all the daily news, and the positive facts have been lagging every day. after they actually happened. More precisely, in the first days of gains and losses of broad point spreads, only 1-2 days later we were served by the real percentages of these fluctuations, which were much more spectacular in terms of the ability to frame these assets; the percentages were much more remarkable compared to the historical percentage fluctuations. Proclaiming that these were “the biggest point swings in history” was correct, but NOT useful information for the investing public, as the percentage decline did not justify such 24-hour chair edge myopia.
Everybody has a job; The press is characterized by his Breda News Today. They caught the attention of people who didn’t even know what the DOW Jones was a year ago. Now let’s loosen the monster in our minds and attentions and reflect on our individual responses to this financial situation.
They say that happiness cannot be bought. The lucky coin is always liquid, always available to those who handle it daily or dare to do it daily. It is our choice. We owe it to ourselves to mobilize our own resources when those beyond our control are less predictable and command our own ships, especially when the waters are rough.
Well then, why do we automatically connote or measure happiness in available financial currency? Why are we short-sighted as to what our investments run out of every day? We need to understand the story a little better because I think it was Mark Twain who once said, “History may not repeat itself, but it certainly rhymes.” Historically we have been through depression and recessions and voila, there are people, real people, who have been through that. How did you do it? Often with stories of personal strength and community support. The Great Depression is, in my opinion, a time that will remain unique in scope and extent; We are still a long way from the financial catastrophe of the global economic crisis. Nor do I believe that the current financial situation is permanent or that it will take decades to get rid of it.
Here are some of the facts courtesy of Dimensional Fund Advisors, an institutional asset management company that I use in Santa Monica, CA:
We are now in the 10th bear market for US stocks in the last 50 years (defined as a 15% or more drop from high to low in the Standard & Poor 500).
From the 9 of October of 2007, the 15 of October of 2008, the Standard & Poor 500 fell by 39.53%.
These are compared to the previous bear markets, their percentage of decline and maturities:
March 2000 – October 9, 2002, a reduction of 49.2% and a duration of 28 months.
(Bill Gross was quoted as saying, “Stocks are nowhere near their low” in September 2002).
August 25, 1987 – December 4, 1987 decrease of 33.5% in 3 months.
January 11, 1973 – October 3, 1974 fell 48.2% in 23 months.
(46% of the adults feared another major depression, which of course never happened.)
November 29, 1968 – May 26, 1970 36.1% in 18 months
December 12, 1961 – June 26, 1962 28% in 6 months
In each of these cases, the markets rallied and paid enormous dividends to those who stayed on the road. Amid the newscasters and financial forecasts, these investors held the wheels of their ships steady and refused to allow unnecessary noise to disturb them.
The above “groundbreaking events” include, but are not limited to:
Highest interest rates in 150 years in 1981
The planning for the year 2000 was immense, but this whole era is