A Nation of Scorekeepers (and depressed ones to boot)
With the Dow losing hundreds of points a day (yesterday’s 550 point gain notwithstanding), I have been doing some soul searching. It is difficult to watch this happen, to see great companies turn into hobbled organizations at the mercy of a panicky global market and the whims of Washington. The saying “What’s good for GM is good for the country” has been made irrelevant, as GM faces its bleakest future since the last time it faced bankruptcy almost a century ago (after being founded precisely 100 years ago it faced bankruptcy a dozen years after its founding).
But I want to talk about the market meltdown on a more personal note. Thanks to the Internet, we now have the ability to check out 401k’s and personal stock market accounts weekly, daily, hourly, or God forbid, from minute to minute. And I am convinced there are millions of people who are transfixed by their accounts, watching their money far more often than they would ever admit. It’s like having a gambling addiction without taking any action. Of course, this phenomenon would have been impossible in the last extended bad bear market of the 1970s. Then, when I bought my first stock with my Bar Mitzvah money in 1974 (200 shares of Gulf Resources at $14 per share), there were only two ways to find out the share price of any stock on any given day.
The most common way was the newspaper, which would give you the previous day’s closing price. Back then I delivered the New York Post in my Bronx neighborhood, so I checked there. Or you could call your broker—mine was a friend of the family who worked for the old E.F. Hutton (the people everyone listened to), who could give you a “live quote.” Obviously we have come a long way since then, but I am afraid that we have come three steps forward and four back. Here’s why.
We have become a nation of scorekeepers, with stocks being one of the worst parts of the phenomenon. Scorekeeping naturally started with sports, and there was certainly nothing wrong with that. Numbers and statistics lend themselves beautifully to sports. Without them, we would not have known that Ted Williams had a batting average of 400 or that Roger Maris edged out Babe Ruth’s home run record in 1961 with 61 home runs (Ruth hit 60 in 1927).
But over the years we have become a nation obsessed with numbers. Now we pay attention to dozens of numbers, some more ridiculous than others. On Monday mornings most every news show tells you which movie was #1 at the box office that weekend, and precisely how many millions it brought in.
We also follow scores and stats on a whole host of diverse topics, such as: how much money rich former wives receive as payments in divorce settlements, how much money a presidential candidate raises in a single month, which actors are in the $20-million-per-movie club, how much money Oprah Winfrey is worth, and how much former big time CEOs get in books deals. And the list goes on.
But more important numbers escape us. Does any of us remember exactly how many electoral votes Barack Obama received—or John McCain?
But back to our fading 401k plans and other stock market accounts. The financial and cable networks, which of course did not exist until the 1990s, certainly do not help the situation. They make us all froth at the mouth while hanging and analyzing ad nauseum every number and tick of the Dow. When that is combined that with millions of on-line trading accounts and Internet-access to millions of others, you get panicked far faster than ever before…and why not? When someone nearing retirement sees a $200,000 account turned into a $110,000 shadow of its former self—while hearing the D-word (Depression) on every cable news channel nearly every day, you can understand why people would want to cash in their chips and try to hang on desperately to what’s left.
Unfortunately, nothing I say here is going to change anything. We will only become more obsessed with the scoreboard in the days, months, and years ahead. Instead, I will impart only one modicum of advice: keep your holdings diversified—stocks, bonds, cash, and maybe, dare I say it—even real estate. If the time to buy is when there is “blood in the streets,” how much more red can there be? At some point, a crisis turns into a genuine opportunity. Oh…yes…and try not to watch your stocks so closely. They are going to look better from a distance for the foreseeable future.