A column from eighteen years ago
The following article was originally published in The Saratogian and The Record on Sunday, September 16, 2001. It appeared at a very dark time in our history during which, as a result of the terrorist attacks, the financial markets were shut down, preparing to reopen the following morning. We publish it again as a reminder to readers of the vibrant American spirit as well as a lesson to investors regarding the value of time. The Dow Jones Industrial Average closed Monday, the day prior to the attack at 9,605. It is currently above 27,000.
First and foremost, our hearts go out to those that lost loved ones as a result of the despicable act of terrorism wrought upon America and its civilians this past Tuesday. Additionally, our thoughts and prayers are not only with the families of the victims, but the victims themselves. We pray that their souls rest with their divine creator.
Over the past several days many pundits have expressed their view that perhaps our intelligence community underestimated these criminals. Regardless of your opinion pertaining to this matter, we believe one thing is for certain, the terrorists have severely underestimated the spirit and resolve of the American people!
The terrorists believe that America is a house of cards that will topple when met with adversity, that we have gotten wealthy and therefore soft. To this we reply that the faces and names of those that responded after the Japanese bombed Pearl Harbor on December 7, 1941, may be different, but the collective American spirit is not! We will respond in a manner that will make our forefathers proud!
The terrorists believe that financial wealth is the underpinnings of our society! That having threatened this wealth with the destruction of the World Trade Centers, our spirit will be broken. To this we reply that the great wealth of the United States is a result of our unbreakable spirit and that it is our character as a nation that has built our wealth and not vice-versa. Take away any or all of that wealth and you will discover that it is temporary. American ingenuity, spirit and resolve will rebuild it bigger and grander!
Finally, let us remind these criminals of the infamous words of Japanese Admiral Isoroku Yamamoto shortly after the attack on Pearl Harbor. “We have awakened a sleeping giant and filled him with a terrible resolve.”
Thank you for indulging our sense of Patriotism and let us close with several reasons why you, as an investor, should remain patient when the United States equity markets reopen for business tomorrow. The first and foremost being that, if history is any guide, the markets will open up down (perhaps as much as ten percent) and then turn as all of the sellers will have already made their exits. The second being that given the nature of the threat, American business will rally together to support the markets by buying back shares of their own companies. Next, the Federal Reserve has pumped more than one hundred billion dollars into the economy, thereby providing a stimulus to economic growth. Finally, and somewhat perversely, the rebuilding of New York City and the changes that will take place in our society will require tens of billions of dollars.
This massive spending of capital by both the government and private industry may very well
be the catalyst to bring us out of the economic doldrums we have been in over the past year. Indeed, this may very well be the catalyst to turn the markets around as end demand for inventories increases.
In conclusion, stay put. Do not succumb to the fear that will be present when the markets open. Rather, continue to think of the long term and why you invested in the first place. In our opinion, those that sell Monday will be selling to wise investors.
For those that heeded the above, they have been rewarded with equity returns as represented by the S&P 500 of approximately 7.50% per year.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-2791044.