"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Wednesday, August 10, 2011

Another 500 Point Drop, Another Beautiful Sunny Day

The Dow lost another 500 points today, giving back its gains from yesterday.   It's now off about 2000 points over the last three weeks, and down 7.4% for the year-to-date.  

Now let's not jump off buildings.   The stock market is always volatile; in fact, if the prices weren't volatile, they wouldn't be meaningful reflections of a dynamic marketplace.   So they go down sometimes, and then they go up, and the hope is that, over time, they go up more than they go down.  

But what if they don't?  At least, not over the time horizon that is meaningful to the individual.   Consider:  if you were 40 on January 1, 1980 and retired at age 60 on January 1, 2000, the stock market had gone from 785 to 10922, an increase of about 14 times.   If you were able to save money during that period, you would have seen a tremendous increase in your capital.  

But if, like me, you were 40 on January 1, 2000, the stock market since then has gone from 10922 to, well, today's close of 10719.   If you were able to save money during that period, you have just about what you started with, and not much more, and maybe a little less.

The truth is, there is always a huge amount of pure luck in life.   You are born here, to these parents, rather than there.   You are born here, in this time, rather than in that time.   If I had been born in 1940 somehow, maybe I would have had an easier time saving for retirement because of the 1980-2000 boom.  

On the other hand, maybe my Dad would have died in World War II, or I would have been wounded in Vietnam, or maybe my little sister would have died of polio.  

In the end, it doesn't make much sense to envy any other generation, not when you live in America in 2011.   Whatever the stock market does, sitting here at my computer, with my beautiful wife and kids at home safe in our suburban Milwaukee home, looking out at blue skies over Lake Michigan, it's hard not to think that we are very fortunate indeed.

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