It’s Not Different This Time
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Whenever the stock markets go through a very rough period, it is inevitable that there is talk that this time things are different. I remember the tech bubble in the late-90′s when the “new economy” was going to change everything and the stock market was now playing with new and different rules. Valuations were irrelevant, as was company revenue and earnings. As long as the company was in the online space it was going to rule the world. Look what happened then! And here we are again with stock market pundits speaking of the changes that we are seeing in the markets and saying that this time, everything has changed. Credit and banking will never be the same again. Will it?
There has been something that I personally have been looking for for a long time. It is a representation of how the media plays things up and pontificates gloom and doom for the sake of magazine and/or newspaper sales. I have finally found it and it was prepared by O’Shaughnessy Asset Management, LLC. In this pdf file, they present a multitude of different magazine and media headlines during the different market cycles we have gone through. Without fail, the magazines present the various economic events as dire and dreadful. Sure, at the time they are. This credit and banking crisis we are currently going through is hard on everyone. However, this too shall pass and we will look back on it as just another blip in the stock market.
Here are a couple of examples of various magazine covers during a couple periods of financial turmoil:
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Click to EnlargeFinally, the last image that O’Shaughnessy portrays is a chart of the S&P 500 and it’s rolling 12-Month returns. It is clear that the market does indeed have its ups and downs. This time will be no different in my opinion. The question we dividend investors must ask is, how patient and disciplined will I be during these tough times to continue investing based on my dividend strategy and my chosen asset allocation?
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Dividends4Life said:
There is nothing new under the sun. It is all a big cycle. Some learn from the past while others are destined to repeat it. Very good read!
Best Wishes,
D4LNovember 5th, 2008 at 8:44 am -
Alan said:
Not sure if this article was supposed to have a link to the PDF behind the article, but, I couldn’t find it nor find the PDF on the O’Shaughnessy web site.
Either way…a good article!
AlanNovember 5th, 2008 at 12:24 pm -
Dividend Growth Investor said:
With all the depressionary talk out there I am ready for it. Of course this recession would be different than any other recession before, causing much more losses to investors who switch strategies based off “media crazyness” while compounding their losses…
We have already seen that in the oil markets..November 5th, 2008 at 1:09 pm -
Ben Moreno said:
So, The Messiah was elected huh?!
I call him “The Messiah” because that is how a lot of people are looking at him.
There are a lot of scared Republicans out there because the Democrats have taken over the House, The Senate and the Presidency.
I like it. It is the show of the Millenium and we have front seats.
Don’t fret though, the truth is that not much will change. It never does. You still will pay taxes and they will go to where the rich people say they will go.
Enjoy.
November 5th, 2008 at 3:23 pm -
Brad Castro said:
It’s times like these that the power of reinvested dividends really kicks your portfolio into high gear–providing the dividends of your stocks are safe and none of the businesses you’ve invested in go under. A big if. It’s also times like these that we discover not all dividends are created equal.
Good post. It’s also helpful to remind ourselves that regardless of when things turn around, we’re already more than a year into it–that means we’re more than a year closer to the end of the tunnel than when we first started.
November 6th, 2008 at 12:36 am -
James said:
I think the main difference this time is that the downward part of the cycle may last a little longer. We need to quit with the bailouts because we are prolonging the agony. Hear more of our thoughts at http://www.stockshotz.blogspot.com
November 7th, 2008 at 10:41 pm -
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November 10th, 2008 at 2:20 pm
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