History and Age they do Tell the Whole Story

Today is a good day to walk down memory lane to bring civility to this ridiculous world.

When Hamas attacked Israel over the weekend, my first thought was the Yom Kipper War 1973. Some of you remember this was the beginning of the oil embargo implemented by Saudi Arabia. Those gas lines were a nightmare. Gasoline was at 36 cents a gallon at the beginning of 1973, and over the next eight years, it would rise to $1.32 per gallon. It was a tough eight years. That may not seem like much, but it’s almost a 400% increase over those eight years. By the way, Pres. Nixon resigned in 1974. The Dow Jones industrial average was trading at 887. It was a pretty scary time!

I started in the industry in the late 1980s. The Dow was at 1993. Over the next five years, we would go through the Junk Bond crisis, Iraq would invade Kuwait, and the US would go through a deep recession starting in 1992. By September 1994, the Dow would be trading at 3843.

Over the next five years, we would experience the Federal Reserve increasing interest rates six times. Sound familiar? By the way, the Dow also topped 4000 in 1994. By September 1999, the Dow was trading at 10,336.

Over the next five years, we all had a fear of Y2K. Remember when everybody predicted that our clocks would go crazy, and our computers would go haywire as the century was about to turn over? It was followed by the Internet bubble bust, with the NASDAQ losing 50% of its value. It was during this time frame we had the attack on the Twin Towers 911. That may have been the scariest time of my career.?

The US would invade Iraq in 2003. I can remember sitting at my desk with a young Lieutenant from Fort Bragg when the headlines hit my Quotron saying bright lights over Bagdad. Just before that, my client got a phone call calling him back to the base. I wish you could’ve seen the look on his face. Dan Rather and company envisioned a desert turn to glass and billowing smoke from every oil rig. Fear ran through the hearts of every American. Oil was trading around $24 a barrel and would skyrocket over $50 by 2005.

By September 2004, the Dow was trading at 10,086, basically flat for those five years. It didn’t get any better over the next five years.

In August 2005, Katrina hit New Orleans and did approximately $160 billion in damage, killing 1800 Americans. Oil continues to skyrocket as the Gulf oil fields are disrupted. In 2008, we faced the deepest recession since the Great Depression. I’m sure you remember the financial crisis of 2008 and 2009. Unemployment rates breached 10%.?

By September 2009, the Dow was trading at 9712. It was a pretty ugly decade. The markets fell from 10,336 to 9712. I had been in the business a little over 20 years by this time. It might be a good time to remind you that what I started, the Dow, was trading at 1973.

Over the next five years, we saw a significant increase in the market. In September 2014, the Dow was trading at 17,042. The Federal Reserve was in its fifth year of quantitative easing, and?fiscal spending was through the roof. The government bailed out the banking industry as well as General Motors. The Federal Reserve was cutting rates, giving an additional lift to the economy.

?Once September 2019 rolled around, we saw the Dow trading at 28,256. Spending in Washington continued, and the national debt soared to approximately $25 trillion. 30-year mortgages were at 3%. During these five years, the trade war began with China and continues today. A pledge had been made to bring manufacturing back to the United States. It was the start of deglobalization. Furthermore, the US would become energy-independent for the first time in many years. Little did we know what we were about to face.

From 2019 to the present, the market will continue to grow to 33,793. In 2020, the global pandemic of Covid 19 cursed the world. It brought every economy in the world to a screeching halt. The Federal Reserve took Fed funds rates down to 0%. Washington spent an additional $7 trillion. As a result, we have a whopping $33 trillion debt. We experienced turmoil in the election results in 2020. And of late, Hamas has brutally attacked Israel, bringing fears of escalating oil prices, bringing memories back of the Yom Kippur war of 1973.

Here is the moral of the story! We have been through some horrendous events since World War II. I have shared those historical moments over my 35-year career. It amazes me how the markets are so resilient over time. Over the last 35 years, we have gone from 1973 on the Dow to its current level of 33,783. Two lessons are crucial to becoming a successful investor. The first one came from a friend of mine, Sir John Templeton. On the conference call on October 14, 2002, he reminded us that?when fear was at its highest point from an investment standpoint, it was time to invest.?On that call, he told us all that if we weren’t a hundred percent invested that day, we would miss one of the best buying opportunities in history. Keep in mind that in March 2003, we would attack Iraq. Fear was everywhere!

The second and most important lesson was never to time the market.?You see, it is time in the market, not timing the market!?The American Funds has a mutual fund (Investment Company of America) that started in 1934 and has averaged an 11.8% return since inception through 2022. A $10,000 investment with capital gains and dividends reinvested would be valued at over $208 million through 2022. Yeah, I know who had $10,000 in 1934.

I rest my case, and I hope you enjoyed this trip down memory lane.

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?Thanks, Mike

?Before making investment decisions, you should consider your personal financial situation, investment objectives, risk tolerance, and needs. Not all strategies discussed may be suitable for all investors. Investment advisory services are offered through World Equity Group, Inc., member FINRA, and SIPC, a Registered Investment Adviser. Dogwood Capital Management is not owned or controlled by World Equity Group, Inc.

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