Economy

BULLS & BEARS: It's not time to lose faith; stock market will be back

October 31, 2005

Two weeks ago, this column was about the bird flu. Most likely, when you look at your October brokerage statement in the next week or two, you'll feel the symptoms. You'll feel a bit puny, tired, achy and feverish.

You're tired of looking at weak statements, achy from getting punched by your stocks, and nearly feverish when you look at your statement's stagnant bottom line.

It's no wonder you feel queasy. As this is being written, the Dow Jones Industrial average is at about 10,200, down around 500 points in the last six weeks.

Six weeks is just a short-term blip right? Well, so far this year, the good, old stock index seems bedridden, as it has lost about 600 points.

Not sick yet? Try this one. In the nearly six years of this decade, the Dow industrials are down 1,300 points. That is tough to stomach.

Recent news isn't helping your symptoms, either.

Our newspapers show pictures of destruction, flooding and mayhem in the United States. The pictures of China they show are of the thousand gleaming new skyscrapers in Shanghai.

The airlines are in a death spiral, the U.S. auto industry is holding its chest and staggering, and consumer confidence is falling faster than the president's popularity.

Is it time to issue a "code blue" for America?

I doubt it. America has been through more trying times than this.

The most trying time came before America was even born.

I'm about two-thirds through the fascinating book "1776" by David McCullough. Where I am in the book, the Americans are getting pummeled to a pulp by the British.

The Brit soldiers far outnumber the ragtag American troops, are better trained, have better equipment, and have a zillion more cannon.

Until I read this book, I never knew the plural of "cannon" could be "cannon"; I always thought you had to put an "s" at the end.

About 4,000 American troops are prisoners of war vs. zero British soldiers. Those were pretty gloomy times.

This difficult period inspired Thomas Paine to write his first installment of "The Crisis," which started with the famous line, "These are the times that try men's souls."

We all know how the book ended, as passion, persistence and patience ultimately won out.

Since those soul-trying days, America has survived other code-blue alerts.

The economy and the stock market nearly became irreparably broken in the mid-1930s through the mid-1940s. Depressions and world wars have a way of doing that.

Through much of the 1970s, America's competitiveness waned and the stock market wheezed and gagged.

But we also know what happened after those earlier trying times.

In the 1950s and again in the 1980s, persistent and patient investors were treated to huge gains, as the Dow industrials doubled and tripled.

Just about nobody today believes the market could double in the next few years; but then again, I'm sure nobody believed it could happen in 1944 or 1980, either.

Today's doubters think America doesn't have it in her to compete, grow and win against modern global competition.

That's the same thing the British thought 229 years ago.



Gilreath is co-owner of Indianapolis-based Sheaff Brock Investment Advisors, money management firm. Views expressed are his own. He can be reached at 705-5700 or daveg@sheaffbrock.com.
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