Dow 12,000. What Happened to All of the Fear?
So, we finally did it. The Dow attained that lofty, never-before-attained level of 12,000 (Dow Finishes Above 12000, WSJ, 10/19/06). Now we can all get back to our regularly scheduled programming.
I clearly recall a day back in mid-June of this year when one of my clients called to say that his wife was concerned about the state of world affairs and their portfolio's exposure to equities. I'm not sure why the wife couldn't call me to express her fears and felt a need to send her surrogate. This couple, in their early 60s, is invested about 60% in diversified equities. They have plenty of wealth (but not too much) and a long time to live. Anyway, the client (not the wife) proceeded to tell me her fears about the falling Dow (10,706), gas prices ($2.91/gal on 6/13/06, but higher in California where they live), oil prices ($68.56/barrel on 6/12/06), bad outcomes in Iraq, potential for a crash in real estate prices, and assorted other worries. Of course, we all felt cranky back then with the dearth of blockbuster summer movies and Al Gore's litany of inconvenient truths. Things just seemed bad and were likely to get worse.
My advice to the client? Do nothing. I realize that when we're feeling fear and emotion the natural reaction is to do something. OK, then go buy a 72-hour kit or a hybrid car. But, don't let it affect your sound, reasoned long-term plan for wealth accumulation and preservation. What I gave the client was a dose of discipline and told him he'd feel better in the morning.
Fast forward to today. Gas prices at $2.21/gal (still higher in California), oil at $59/barrel, Iraq is worse, Congress is in a heap, no good movies, and more inconvenient truths. And, the Dow at 12,000+. See, I knew he'd feel better in the morning.
Many times the best strategy is to do nothing. You're better off kicking the cat than kicking yourself later.
I clearly recall a day back in mid-June of this year when one of my clients called to say that his wife was concerned about the state of world affairs and their portfolio's exposure to equities. I'm not sure why the wife couldn't call me to express her fears and felt a need to send her surrogate. This couple, in their early 60s, is invested about 60% in diversified equities. They have plenty of wealth (but not too much) and a long time to live. Anyway, the client (not the wife) proceeded to tell me her fears about the falling Dow (10,706), gas prices ($2.91/gal on 6/13/06, but higher in California where they live), oil prices ($68.56/barrel on 6/12/06), bad outcomes in Iraq, potential for a crash in real estate prices, and assorted other worries. Of course, we all felt cranky back then with the dearth of blockbuster summer movies and Al Gore's litany of inconvenient truths. Things just seemed bad and were likely to get worse.
My advice to the client? Do nothing. I realize that when we're feeling fear and emotion the natural reaction is to do something. OK, then go buy a 72-hour kit or a hybrid car. But, don't let it affect your sound, reasoned long-term plan for wealth accumulation and preservation. What I gave the client was a dose of discipline and told him he'd feel better in the morning.
Fast forward to today. Gas prices at $2.21/gal (still higher in California), oil at $59/barrel, Iraq is worse, Congress is in a heap, no good movies, and more inconvenient truths. And, the Dow at 12,000+. See, I knew he'd feel better in the morning.
Many times the best strategy is to do nothing. You're better off kicking the cat than kicking yourself later.
posted by Sherman L. Doll, CPA/PFS at
5:03 PM
