The Daily Dow
Monday, October 27, 1997
by Robert Sheard
LEXINGTON, KY. (Oct. 27, 1997) -- Maybe I'm just naive. Maybe I'm a real fool instead of just a Fool. Maybe I'm just too young to put today's investment climate in perspective (I'm 37). I'm sure some will find even more caustic ways to describe my attitude, but I'm a bit appalled by today's coverage of the "Monday Selloff" and the subsequent half-hour trading halt at 2:35.
Yes, today's drop was 550 points. Yes, that's the biggest point drop ever. Yes, that's 7%. But let's focus on the bigger picture? The market's all-time high (set in early August) was 8259. When the market was halted the second time today, it was sitting at 7160. By my calculations, we're now only 13.3% below the Dow's record. For most market analysts, that drop just represents a real correction, nothing like the vision of the apocalypse you might suspect listening to the hyperbole today. Do you recall where the Dow was just three years ago? (3875, an 85% gain, even after today's "selloff.")
I admit I was too young to have a clear awareness of the markets during the 1987 crash. (I was still worried about pimples and getting a date to the football games on Friday nights.) But the numbers today and back in 1987 are nothing alike. In October 1987, the market plunged more than 22%. Interest rates were soaring. Today, the drop was 7%, and we're still in a relatively low interest rate - low inflation zone. Yet you would think it was an instant replay of ten years ago.
Maybe we've just lost perspective after so many fabulous years for stocks, but so far, this is not that significant of an event. Don't get swept up in the hype and the gnashing of teeth by reporters anxious to score a lead story. Worse yet, don't even nod in the direction of the huge bears who are going to come flocking to the studios claiming they predicted this all along. Sheesh, look at the returns you'd have had if you had followed their advice over the last decade. If you're a Dow investor, today's drop is a correction, nothing more crucial than that (unless you have idle cash, that is). I just wish I had an extra hundred-thousand dollars sitting around crying to be invested.
Just as when the market is soaring, Fools, stay the course. Period. (By the way, check out the model portfolio numbers for the weak month of October this year. While the Dow has had its 10% correction so far, the Foolish Four only slid one percent, overtaking the Dow for the year to date. Just one more reason not to get anxious with this approach. It tends to hold up much better than the overall index in weak stretches.) Fool on!
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Stock Change Last -------------------- T -5 1/8 45.25 GM -4 1/16 64.00 CHV -4 1/2 79.00 MMM -3 1/2 92.25
Day Month Year
Day Month Year
FOOL-4 -6.95% -1.08% 14.91%
DJIA -7.18% -9.87% 11.06%
S&P 500 -6.85% -7.40% 18.42%
NASDAQ -6.94% -8.86% 19.00%
Rec'd # Security In At Now Change
1/2/97 153 Chevron 65.00 79.00 21.54%
1/2/97 179 Gen. Motor 55.75 64.00 14.80%
1/2/97 120 3M 83.00 92.25 11.14%
1/2/97 479 AT&T 41.75 45.25 8.38%
Rec'd # Security In At Value Change
1/2/97 153 Chevron 9945.00 12087.00 $2142.00
1/2/97 479 AT&T 19998.25 21674.75 $1676.50
1/2/97 179 Gen. Motor 9979.25 11456.00 $1476.75
1/2/97 120 3M 9960.00 11070.00 $1110.00
CASH $1167.51
TOTAL $57455.26