This is very helpful. Let’s take a closer look at what he’s saying:
Even though the stock market has lost 40 percent of its value since one year ago, as measured by the Dow Jones Industrial Average, the stock market at the end of yesterday was still up 397 percent from its close on Oct. 10, 1988, at 2,158, twenty years ago today. [Twenty years ago today I was 14.]
If you had invested $1,000 in a broad-based mutual fund on Oct.10, 1988, and the fund had merely followed the performance of the DJIA, you would have $3,970 today. [But I didn't have $1,000 when I was 14. Should I take a thousand dollars now, knowing what I know about the market, and travel back in time and give it to my 14-year-old self to invest? At 14, I'm a minor, so how will I convince my parents to let me put it in a mutual fund instead of in my savings account at the credit union?]
Granted, you would have a lot more if you had sold a year ago – around $6,560 [holy shit! That's almost twice as much as $3,970! Can I go back in time twice? Once to give myself $1,000 and then again to pull the money out of the market back when the getting was good?] – but still, even after a drop of more than 40 percent in the last year, your investment would have grown 7.1 percent per year. That’s not great growth compared to some other kinds of investments, but it’s far, far better than the return you’ll ever get from Uncle Sam from all that money you paid into Social Security. [So, Bill, are you advocating we put folks' social security money in the stock market? Because I'd love to see that go over like a lead balloon.]
The message? Think long term. [Yes, long term. So, for those of you who thought you were going to get to retire this year, sorry. For those of you who thought you were going to get to go back to college after winter break. Sorry. For those of you who are not sure if you'll even have a job to attach your 401k to. Sorry. But the good news is, the Republicans are prepared to sit around and wait for the market to right itself while you suffer. Oh, and tax you on your health benefits. Woo hoo. Vote McCain! Maybe if you do, Hobbs will let you use his time machine. In which case, might I recommend going back and buying Microsoft?]
Filed under: Politics and Other Nonsense
How far are we from a mass layoff of workers should be the next question? There is no way that companies can meet payroll going forward if consumption continues to drop.
Is there the money, and will, to do government sponsored workfare programs, such as the WPA and CCC, if the economy continues to slide? The similiarities with 1929-32 are striking at this point. I fear that we don’t have the work ethic or community spirit needed to weather another complete collapse.
Will the market give you COLA? Because, without them, that 397% increase doesn’t look so good.
I think we have the work ethic, I really do. But what work is there for people to do? I mean, to me what’s so scary about this is that it’s been coming on for a long time. I mean, I can remember sitting around with my dad during the Clinton years wondering when the prosperity was going to trickle to our little corner of the world. People were struggling then, but found ways to get by.
And now? Now it looks like we’ve switched from long slide to cliff dive and I wonder. I mean, yes, folks could come to the cities looking for work, but how will they get here? We don’t have the same kinds of rail infrastructure we had in the 30s and 40s. And what if there’s no gas to get them here?
I mean, no, you’re right. You can’t keep people employed at, say, GM if no one’s buying cars. But what happens to Michigan if GM has massive layoffs?
It’s scary and I just don’t feel like “wait 20 years and see” is a solution.
And that’s part of what really pisses me off about McCain and Palin not stepping up to stop people from shouting out hate-filled shit against Obama, because anybody who reads any history knows that angry people during economic crises do not bode well for scapegoats. McCain and Palin should not be turning Obama into any kind of scapegoat.
If a total collapse has to happen, I’m hoping for a return of camps like the CCC. My Dad talked lovingly about his time there, said he learned a lot about many different skills that served him well throughout his life.
We are a bit soft, B. Sure, there is a work ethic, but hardly anyone alive today has ever really worked. My Dad, who was a migrant fruit picker, found the work at the CCC camps physically unchallenging.
I said two years ago that this was coming, and I mentioned then that it may well be Walmart that saves our asses. I may have just nailed it.
The mall is hiring holiday help this time of year. And Trader Joe’s is looking for workers as well for their new store. I know this b/c I turned in applications yesterday.
People like Bill Hobbs have no business using actual facts in ways that have no use to anyone.
Stock prices over the last 10 years have been unnaturally high. I remember not too long ago that it made news every day when a new high was reached. You know what that means? New people were buying in to the market every day. Those are the people who are flat-out broke now. And, yeah, people who’ve been investing for over 20 years aren’t quite as bad off. But I don’t think that’s the majority of people since it’s just been in the last 20 years that 401(k)s have replaced pensions as the predominant form of retirement account. My own mother was actually surprised recently to find out I didn’t have a pension. And that companies didn’t do that any more. She had the same job for over 30 years and was insulated from the crap I’ve had to deal with. So are a lot of baby boomer white folks. It’s the rest of us who are in trouble.
And the real trouble isn’t the price of stock. It’s the pyschology of seeing your portfolio decrease in value that makes you feel that you are even though nothing’s really changed (unless you’ve lost a job). The domino effect from that is the real problem. Because then people spend less, businesses make less money, they lay people off, people spend less, etc.
Ugh, I’m starting to bore myself. But share prices have little to do with the actual health of a company…everything here is driven by perception. The biggest problem is the “credit crunch” from banks that stop lending money because they think people are going to start raiding their bank accounts and shoving money under their mattresses.
Which is why I should really get a better interest rate on a CD right now, but whatever.
Oh my God, a cookie for anyone who reads that and understands what I just said. Too much sugar this afternoon.
Joe Six Pack is so lucky to have Republican Party Spokespeople managing his finances. Let’s hope Joe Six Pack has a longer outlook than, say, President Bush had over the last 8 years.
this might be off topic, but I am so SICK of that stupid term “Joe Six Pack” – nice way to reduce the hard working people of America to a stereotype of beer-swilling simpletons.
This is a much better post than what Hobbs wrote:
http://www.fool.com/investing/value/2008/10/10/if-youre-about-to-panic-read-this-first.aspx
Then again, the Motley Fool’s audience is larger than just well-off older white folks in Tennessee.
All I know is I want Bill Hobbs to come to Hooterville and see what’s going on.
>I am so SICK of that stupid term “Joe Six Pack” – nice way to reduce the
>hard working people of America to a stereotype of beer-swilling simpletons.
Indeed. Besides which it’s not fair to us lazy beer swilling intellectuals.
Mack, I’m just not buying that. A lot of people I know work damn hard. Shoot, part of the reason they work so hard is so that they can send their kids to school so that those children won’t have to work hard. I mean, let’s be clear here. Hard work sucks. It’s not a sign of softness that people avoid it; it’s a sign of smarts.
I mean no offense, but I think we can all see that the people who are already suffering will suffer worse–there won’t be work for them to do, no matter how hard they’re willing to work. So, whether we’ll be up to the hard work is kind of beside the point if there isn’t any hard work to be done.
Joe Six Pack sounds like some kind of grown-Snoopy character.
And I think the rest of you are missing out on the big implications of what Hobbs is saying–Republican Time Machine! Worry no longer, Newscoma. Just scrape your last little bit of money together, travel back in time, and buy Starbucks stock. Then travel back in time again and sell when it’s at its highest. Shoot, forget that. Get together a dollar, travel back four weeks ago and play the lottery!
When we decided to usher in the “service” economy, we stopped valuing hard work. There is too much emphasis on “value added.” When you buy a house, for instance, a whole bunch of people get a piece of the pie that don’t really do anything, and their compensation is disproportional to the guy that made sure your foundation was laid properly, or that your roof won’t leak.
I know I am seldom able to get help here at my place even at a competitive wage. I guess our definition of hard work is way different.
When I got to go back in time twice I lost it–so so funny. These guys, as Jon Stewart say, make the job too easy. But seriously, I’ve begun to worry about the rah rah Republicans. Even the intellectuals seem to have lost their logical capacities. Kristol falls over himself for Palin, for example, as if he’s in junior high with a crush on the student teacher. It’s as if their need to believe (or their inner junior high self with its crush on the student teacher from the normal school down the street) trumps their ability to analyze rationally.
The phrase “think long term” pisses me off the most. My mom and stepdad, ages 65 and 75, have lost most of their retirement the last couple of days. He’s in poor health, as is my grandmother, and they both require a lot of mom’s time. Yesterday she said she’s thinking about trying to find time to work. At sixty-five! After 15 years of not working! They have few bills. They saved up their money and bought their cars and house with cash. But they have medical bills and groceries and life! What do they do if this whole thing goes *poof*?
“Long term” my tush!