Thursday, September 17, 1998

The End Of History?
by George Runkle [email protected]

In the past month or so, we've seen something we all knew would eventually happen. The market corrected, in a big way. How does one deal with this? Should you sell every stock you own and buy gold to bury in the backyard? Some people are probably doing that right now. Many more people are selling and putting the money in Treasuries or CDs.

Now, looking back at the market during its high in July, there certainly were a lot of stocks that hit some unbelievable valuations. On the other hand, look at some of the companies that have taken a hit lately. Coca-Cola is a perfect example. Sure, it carried quite an extreme P/E ratio and was rising in price much faster than earnings. However, is it worth dumping in a panic? If you think the problems in Russia and Japan will make Coca-Cola disappear as a company, maybe. If you feel that way, bury some gold in your backyard, fill your basement with dried foods, and wait patiently for the world to end. I don't think the world will end, even though we are having problems now.

No matter what, we will still drink Coca-Cola. There will be a market for Dell and Compaq computers. Intel will continue to sell microprocessors. People will talk to each other around the world on the Internet, so the market will be there for switches, hubs, and all that hardware. Life is going to continue, not too much changed from how it has been. The companies we invested in a month ago haven't really changed that much.

I can't say if the market has hit bottom, and in spite of the pronouncements of the Wise, they can't either. Remember, earlier this year many of the Wise predicted the Dow would hit 10,000 this year. Also, if you think back when the Berlin Wall fell, other Wise predicted "the end of history." There would be no problems in the world, ever. Now we're having problems, the market's showing it's volatility, the Wise are panicking, and history sure does continue. But I can be sure that the companies I own stock in still have a future and will continue to grow in value. I'm going to keep my stocks and dig in my backyard to plant some trees instead.

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