The Long Road Home

Stocks plummeted again today. The Dow Jones Industrial Average sank over 200 points to finish at 6600. That's its lowest close since April 15, 1997. 15 months of recession and no bottom yet.

Wait--I'm not even to the bad news yet. The bad news, as Jason Zweig wrote in last week's Wall Street Journal, is that the road back from a calamitous recession like this can be long and filled with potholes.

In his piece, Zweig describes the work of finance guru Elroy Dimson of the London School of Economics. Professor Dimson and two colleagues studied 17 stock markets from around the world, going all the way back to 1900. Their takeaway: We'll have to wait another 9 years before the Dow has even a 50/50 chance of getting back to where it was two years ago.

If you're looking for some advice on what to do in this market, good luck. Prof. Dimson's conclusion: It's pretty much hopeless.

A double whammy awaits your IRA or 401(k). First, stocks have lost a great deal of their value. Some portfolios are down 30% or more. But second, when stocks to begin to appreciate, don't look for the tremendous increases of the past decade. Having suffered third degree burns on equities in this recession, investors will be leery of stocks. The result: slow appreciation of value.

Let's add a third whammy. As you read this, the government is inking the presses, printing banknotes to cover the record spending spree that the President and the mob in Congress are engaged in. The result will certainly be rampant inflation. So those stocks you bought with 1988 dollars, believing that they always appreciate in value? They'll be worth a lot less in 2009 or 2010 dollars. If you try to cash out of the market, the value each dollar you receive will be less than the real value of each dollar you paid.

Nobody here gets off without blame. Not the Republican president who presided over the biggest growth of entitlement spending in the history of the Republic. Not the Republican Congress who squandered the trust of a nation on an orgy of earmarks and corruption. Certainly not the Democrat Congress which has seen the economy tank virtually since the day it reclaimed the legislative branch from the Republicans. And most of all the current president who hijacked his party's nomination as an English speaking Hugo Chavez populist, then masqueraded as a somber, statesman-like centrist to win the presidency, and now presides over the country's rapid decline, which he has neither the experience to the aptitude to stop.

Just thought you might like to know.