I Publius: Patience key in beating the recession
It doesn’t really matter whether we are in a recession or a depression. As the old saw goes, if you are out of a job, it is a depression. If your business is close to bankruptcy or has folded, it is a depression. If you had planned to sell your house before you retired and live off the proceeds but have now found that your house won’t sell or that it is worth a fraction of what you thought you could get for it, you are experiencing depression.
A lot of our not-for-profits are in the tank, while some among us seem to have weathered the storm better than others. The Mahaiwe Theatre just announced several new board members with very deep pockets. Maybe that’s what has to happen in order to keep the programming coming at this gift to our community. Some boards have instituted absolute bottom line donations that have to be given by board members. Some, like WAMC public radio can come to its members for donations, and haven’t had to do that.
Necessity is the mother of invention. Those who will survive this tsunami of an economic storm will be the ones who have thought up new ways to get through the tough times. We are all in this together and the more we band together to help one another, the better we can handle this, the toughest time since the Great Depression.
Of course, we all have to make personal decisions. Some people expect this economic mess to continue. If someone has a couple of hundred thousand dollars in their retirement account which is half of what it once was, the question arises as to whether they should put the money under the mattress and get it out of the market. In other words, save some of your money before it all goes down the toilet and you end up with nothing. This is a very appealing argument for many of us.
The smart guys who helped to get us into this mess have been telling us all along that things will turn around, big time, and those with money remaining in equity (stock) accounts will rise with the market.
The time frame, we have been told in the recent past, is a little more than a year before that happens. But no one seems to think that way right now. It turns out that a lot of what these so-called experts have said is proving to be not so smart. In fact, they are now covering their posteriors, saying that they have never seen anything like this before and all the rules are out the window.
Then there is the argument that if you take the money you have left out of the market and wait until things begin to turn around, you can get back in when things are on the up tick and you will have more to invest then if you’d left it there and were almost completely wiped out. Most of the big shots will tell you that we unqualified people will never be able to “time” the market. They will tell you that they have complicated and refined tools that will help them make these predictions. To which I say, “Oh yeah, then where were you when things turned upside down and the stock market was losing half its value? Did you forget to tell us?”
I have this theory that GE is about as central to the American system of government-industry cooperation as you can get. If GE goes under, all those guys who have been hiding guns in their basements for the day that gangs go roving from house causing mayhem will turn out to have been right. Don’t get me wrong — I don’t like GE’S failure to do socially responsible things. I just think that if GE is stock is down in the dumps, now is the time to follow that old injunction about “buying low and selling high.”
We all know people, including our parents, who told us that they could have been multi-millionaires if they had only bought stock when it was low. They tell us the same thing about the house down the road. No doubt about it — now is the time to buy. Those who do, prudently and with insight, will be on easy street. Those who don’t will be left to mutter, “I had the chance and I blew it.” When the market starts to rise, a lot of people will be taking that mattress money out and going in full bore.
For those who want my advice, wait until the market goes up a couple of days (big time) and get back in. Otherwise, the money you do have will be eaten by inflation, which will certainly happen when the market explosion occurs.
Originally Published in the Berkshire Eagle, 3/7/09