It's true that fewer people were in the market in the 1970's. People's retirement plans were funded by their
employers, and were not self-directed as they now are. I don't think there were 401K accounts back in the
1970's. Also employee stock options were extremely rare back in the 1970's, if not non-existent.
Hence the apprehension that many are feeling about this current market environment.
here is a really touching letter that was sent into briefing.com about dreams diverted:
Reader Responses: An American Dream Ruined By Nasdaq
23-Mar-01 06:58 ET
[BRIEFING.COM - Robert V. Green] On the anniversary of the Nasdaq high last year, about two weeks ago now, we asked Briefing.com readers to send us an email on how they are coping with the drastic market decline. We reprinted some of these comments earlier this week (See the Stock Brief of Tuesday, March 20 - for a free temporary subscription account to view our archives, send me an email at Robert V. Green, at rvgreen@briefing.com. Today we reprint a particularly striking story from a reader, whose experience with the Nasdaq crash wound up destroying more than ten years of hard work at the American dream of financial independence.
Here is the story sent to us from "D."
Dear Mr. Robert Green,
You recently asked in an article for Briefing.com, for people to write about their experiences with the stock market over the last year, and so I write: It is the middle of the night here, and my four children are tucked in bed. My husband and I are still awake, we don't sleep anymore. They tell me I have to eat. Well, I think I am eating, because the food is sitting in front of me, and then it is gone. It doesn't matter, I can't taste anymore, anyway. How did I get here? Let me take you back.
A little less then fifteen years ago, my husband was a sailor in the United States Navy, and I was a dutiful Navy wife. Because my husband's paychecks were so low, it was difficult to make it from paycheck to paycheck. To support our growing family we started a small business, selling sports nutrition products to military MWR departments. We began working eighteen to twenty hour days. It was hard, but we were working for a better life for our family, we were reaching for the American Dream.
Finally, in March of 1993, my husband was honorably discharged from the Navy. We headed towards Dallas, so that I could be near my grandparents in their final years. We took everything we had saved and put it into our business. At that time, we began selling to mass market accounts. We hardly slept, we barely ate, we put our hearts and souls into making our company a success. We put our babies on our backs and we pulled orders, even when it was 120 degrees in the warehouse. We were finally able to hire employees, but we continued to work long hours, side by side with our employees.
What kept us going? We knew that someday our dreams would come true, but only if we worked for it.
About a year ago, when I looked in the mirror, I was so proud of the person looking back. We had worked so hard. Not only did we work hard, but we saved everything we had, for our future. I clean my own house, I mow my own lawn, and I sack my own groceries. I drive a Honda. It had finally paid off, we had a successful distribution company and almost one million dollars. The joy, the pain, the sweat. the tears, we had done it, together, as a family.
After a lot of soul searching, we decided it was time to rest. Our oldest child was getting ready to start high school. Our children would need us now, more then ever. We weren't going to lose them to peer pressure, while we spent twenty hours a day at the office, and they were wanting to spend more time with friends and less time pulling and shipping orders, and filing paper work.
We decided to shut down our business, invest what we had, and concentrate on our family for a while. We did our homework. We looked for companies that were already making money, and we stayed away from Internet start ups. We only wanted to invest in solid companies. But, most of all we were encouraged by analysts that told us what to buy, and gave great forward looking price targets on certain stocks. We listened to what they said, and we trusted them. We invested in companies that were solid, that were making money, and the analysts told us they were the best investments we could make with the money we had.
Last summer we took a family vacation to Hot Springs, Arkansas. We rented a boat on Lake Hamilton. As we rode around the lake, we stared in disbelief at the huge homes being built on the water. My husband and I held hands, and talked about buying our dream house on the water. A home where my children would finally each have their own room, and I would finally have my gourmet kitchen. We were full of life, and full of dreams. We had nearly given our lives to get there, but get there we did.
We had started with nothing, but we worked hard, and gave it everything we had. Then, we returned home, and our world fell apart. Our NASDAQ investments were falling faster than we could even see. Those same analysts and brokers that told me to buy, were telling me to hold on, and even buy more on the dips. After all, we had invested in good companies, we were safe~ we hadn't jumped on the Internet train to nowhere, we didn't jump in when China was a popular word.
We invested in companies with good futures, with people who knew what hard work was, people like us. We didn't invest in companies that may or may not make it. We invested in companies that they said were good investments.
It is now March, and to date, I have lost almost everything I spent my lifetime working for. I have lost $800,000.00. That's right eight hundred thousand dollars!
And now, where are those analysts that were telling me to buy one year ago? They are the same ones telling me to sell the same stock, now that it has dropped 70-90%! To make matters worse, they now sit on television comparing a chart of the NASDAQ to the Nikkei. Are they telling us the NASDAQ is through? That we will go nowhere for many years to come? In some cases, we have been forced to sell, and everything we had and everything we were is gone.
I have heard comments on television that retail investors made their fortune in 1999, and they just got what they deserved. Was this a set up to take out the retail investor? Well, our lives will never be the same. We didn't make our money in a year. My husband, my children, and I put everything we had into building our future.
We were robbed! We were robbed by the brokers and analysts, and we were robbed by the NASDAQ that allowed the volatile trading on these stocks to continue. I worked so hard, so that my children would have me now, when they need me most, they are 9, 11, 13, and 14. now, I have to look for a job that will keep me away from them, and probably pay me less than I need to pay the bills. I can't stand the pain in my husbands eyes, he feel like he failed us.
I would like to go back to last summer, back to Lake Hamilton and dream, and be proud of the person in the mirror. but, now if I rent a boat, I may not be able to pay my electric bill. I nearly gave my life to my work, but I will never own my huge house on the water. Now, when I look in the mirror I see the shell of a person that once existed, that I will never see again, a person that will never stand and hold her head up again, a person who got taken down in the year 2000, on a ship called the NASDAQ.
So, when you ask me to write about this last year, I tell you, when I look back, I will remember it as the year I was robbed, the year that left a whole in my heart, the year that my American Dream turned into a nightmare.
Now, if you will excuse me, I am going to put on a pretty dress, comb my hair, and sit on the couch. I am waiting for the Publishers Clearing House Patrol. Sincerely, D.
Conclusions
The great undoing of so many investors over the past year all boils down to one thing: a mismatch of the risk profile of the investor and the risk potential of the investments they selected. Matching your investment risk level to the level of risk you can reasonably live with is probably the single most investing lesson anyone can learn. Unfortunately, the Wall Street machine has always had an interest in minimizing this message.
Our sympathies go out to every investor who wound up investing in stocks with greater risk potential than they either understood or recognized. After all, the risk side of the market never reared its head for five years, from 1995 forward. But when it finally did, risk made up for its long absence with a vengeful reminder of its power.
For those of you who were fortunate enough not to be ruined by the Nasdaq crash, as "D." was above, her story may be helpful as a reminder going forward. There are still great possiblities in the stock market, but it will important to match your investment's risk potential with the amount of risk you are comfortable with, and can afford.
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