This is our market alert video for March 26, 2020 and what we’ve seen over the last three days is a significant rally. The markets, the Dow and the S&P, rose tremendously on, at first, the hope of a stimulus package, and then, the passing of a stimulus package, and we’ve seen a mighty rally, so we might be thinking is this all over now because of that. Well, the one thing that I want to be sure that we look at is history, because there’s an old expression that says, “Those that don’t learn from history are doomed to repeat it.” And so, if we look at three major bear markets that we’ve had in the past, the Great Depression, Y2K, 2008 let me give you some data on that.
In the Great Depression from September 16, 1929 to October 29, 1929, which basically was a little over a month, the Dow fell 37.5%, so in one month it dropped like that — very similar to what we experienced just recently. Then, there were all kinds of buying going on, and it rose by 20% from there. But then by November 13, which was almost not even a month later, it fell by 50%; so that was the great depression. So, the people that bought in that rise, that 20% rise that made it go up like that, they got killed.
Let’s fast forward, let’s go to Y2K. On April 3, 2001 the S&P 500 Index, the stock market was already down by 27% at that point. Then, with government stimulus and all the stuff like that, it rose over the next month and a half. By May 21, it rose by 18%, so there was optimism, government stepping in, look what’s going to happen. By September 21, which was four months later, it had fallen 25% after that.
Let’s go to 2008 and look at that. On October 27, 2008 the market, the S&P, had already fallen by 43% at that point. Again, the government stepped in. You may remember McCain and Obama cancelled their campaigns. They went over to sit in on what the Congress was doing, so whoever was president would know what the big package is and be involved in the decisions. Well, the market rose by November 4, in one week, it rose 18.5%. Boom, went way up because the government is going to save the day, but then by the end of November 2008, only two weeks later, the market had fallen by another 25%. So, you know, I’ve been doing this long enough that I have seen this before.
I saw Y2K and 2008, I did not see the Great Depression, I’m not that old, but there’s going to be a lot of hand wringing right now. We know you’re going to be thinking are we missing out, has it turned, is it all over with. From an economic standpoint, we believe there’s still a second shoe to drop, and we don’t know what it is. We don’t know what the unforeseen consequences are of stopping the economy just on a dime like that. What is the follow-on effect on that going to be? What’s going to happen to the mortgages and what’s going to happen to rents, and what’s going to happen to all the countries around the world who may go bankrupt? There’s a lot of follow on here that we don’t want to be involved in. We’re better right now staying out of all of this, sitting on the sidelines, and I hope you feel the peace of mind that I do, knowing that you’re safe.
Now, a question people have asked us is, “Where is our money invested?” Well, the money from the proceeds of our sales is sitting in a government bond money market. That is what we believe to the be the safest place to put the money on the planet earth. It’s backed by the full faith and credit of the United States Government, and they have a printing press, and they can print as much money. The Fed said it — they will go to whatever lengths necessary to protect that, so it is the safest place that we can find to put your money in.
So, the important thing here is this all will pass; 2008 passed, the Great Depression passed, Y2K passed — this all will pass. The virus will be conquered eventually. The important thing is to live to fight another die, and I mean live both physically, mentally — I know I’m going crazy being sequestered. You may notice I’m in my office today. I come in because there’s nobody here, and I think I should be safe. Nobody’s been here in a week, so there shouldn’t be any viruses around. I still wash my hands, I still spray everything down, believe me. But we need to live physically to fight another day, but we also need to live financially to fight another day.
So, I hope you have the peace of mind we want you to have knowing that you are not in equities, and I hope that you are sleeping well knowing that your finances are being taken care of by us. That is our goal, and so we thank you so very much for the trust and confidence you’ve placed in us. We will do our utmost. Every decision we make is around our two goals for you, your money lasting as long as you do and you having financial peace of mind, and that drives all the decisions that we made. Our investment committee literally has been meeting every single day for the last two weeks and Saturday/Sunday, I think there’s one Sunday in there that we didn’t, but even on Saturday to make sure that we are on top of everything that we can for you.
So again, thank you and we will talk soon.