If I tell you that I have been a financial advisor in five different decades, it makes me seem older than I am; but the fact remains that I have been helping clients formulate their wealth plans and investment strategies since the 1980’s. Over that time, I have helped thousands of people and have had multiple more conversations about money, the economy, politics, and anything else which may derail an investment plan. As you can imagine, with my primary focus of guiding clients through tumultuous markets and uncertain and often emotional times, I have heard frequently, “how this time it is different,” and “the economy will not go on.”
Let me highlight just a few of those times over the last five decades. In 1989, I was a fresh-faced young kid with a dream and a desire to help people meet their financial goals. The DJIA was right about 2,200. Shortly after I entered the industry, while we were still reeling from the junk bond crisis, the military of Iraq invaded Kuwait, leading to the first Gulf War. This immediately preceded a recession in the U.S. as the Soviet Union dissolved. Then we had the Los Angeles riots as civil unrest and race relations dominated our consciousness. Being fairly new and much more influenceable back then, I allowed doubt about the future of our economic system and financial markets to enter my thinking. I thought maybe my clients’ worries were valid, and the weight of our national debt and woes of the day would bury us.
I remember the day that the DJIA hit 5,000, shortly after it hit 4,000. The market was deemed to be “too high.” This was as we were just entering the technology craze as anything with a dot com was going to the moon. Then Fed Chairman, Alan Greenspan warned of irrational exuberance and the financial markets plowed forward with reckless abandon. Shortly after this, it was discovered that when computers were originally programmed, in an effort to save space, the first two digits of the year were assumed to be “19” … but the year 2000 was upon us. Y2K as it was called, would shut down the banking system, the markets, the electrical grid, and make us more vulnerable to people who wished us ill than ever before. I knew rational people (maybe some of you) who stockpiled food, currency, water, even ammunition as chaos was expected. Prominent investment media personalities advised to “get out of the market.”
As it turned out, Y2K was a big fat nothing burger, but what did happen was the technology bubble of the late ‘90’s burst and put us into a recession. While were navigating this new economic reality, terrorists were learning how to fly planes. They used this knowledge in an orchestrated fashion to create a tragic and unforgettable attack on U.S. soil. The first time since the attack on Pearl Harbor. The loss of life was devastating, and the heart of the financial capital was gutted. I was told by clients that the markets would never recover, and the wounds would never heal.
In 2002, we were crawling out of the jobless recovery and the first three years of negative returns in the market since the Great Depression. Meanwhile, Enron (the darling of Wall Street) collapsed leading to a cascade of corporate accounting scandals which undermined the credibility of the financial markets. It was impossible to trust any of the research as it seemed it was all tainted. I was told by clients, “see, the system is rigged” and I tended to believe them. We weathered that storm … while the southern part of our country was devastated by storms of another variety – hurricanes.
The south started to re-build and the DJIA moved higher to hit 12,000 for the first time. Finally, things started to feel a little bit better. People were working, the economy was growing, and the market was hitting all-time highs. Americans, it seemed were flush with cash and the living was easy. Behind this façade of wealth was a growing mountain of debt and opportunistic bankers, investment creators, and legislators mishandling “sub-prime” debt. The house of cards collapsed, as did many historic financial houses. The government had to intervene in massive and unprecedented ways to prevent us from dropping into the abyss. The Great Recession rivalled, and was compared to, the Great Depression in terms of scope and damage. The losses in financial markets were severe and unemployment hit levels this generation had never before seen.
Clients were aptly concerned, and the resolve of wealth managers (including this one) were tested in new ways. Eventually we crawled out of that recession, battle worn, and cautiously hopeful about the future. In the midst of this we had several very contentious elections and political divisiveness became so rampant that personal relationships were irrevocably severed, and civil discourse became as nostalgic as an 18th Century gentleman ending an argument with “Good day, sir!”
“This president was so bad that the U.S. will be irreversibly damaged,” screamed both sides. This is when I closed my social media accounts because the vitriol was so high. Meanwhile, in a lab in Wuhan China a virus “escaped” and was being transmitted at a scary high velocity. It was novel, indeed. At first it seemed like an Asian problem, like the bird flu. The markets paid no mind to it. Once it started arriving on our shores, infecting Americans, we all took notice. We quickly found ourselves in the midst of an unprecedented pandemic the likes of which we hadn’t seen since the Spanish Flu. The economy was essentially closed, and markets experienced the fastest bear market in history, even worse than the Great Depression. The death toll was a constant banner streaming across every news program. The flames of fear were fanned from every direction.
As you know, the economy reopened and the markets slowly recovered. But in the government’s attempt to help many in need and the businesses that were shuttered, it introduced an unprecedented amount of new money into our economic system. If you had any economics class in high school or college, you know that the textbook definition of inflation is: too much money chasing too few goods. As supply chains were disrupted and shelves were emptied of toilet paper, baby formula and many other items, we clearly had too few goods. All of this new money chased it, driving prices higher leading us to inflation problem we are now enduring.
Over these five decades I have weathered through eight bear markets caused by eight unique (unprecedented) crises, including the current one. As experienced as I am, I can assure you that I have no reason to believe this one will be any different than the previous seven full and complete recoveries. I am not as influenceable as I was 34 years ago, mostly due to the variety of the experiences I have had. I feel like a fisherman on the North Atlantic who has weathered so many nor’easters as to not be bothered by the next one. I trust my vessel, my knowledge of the seas, the prevailing currents, my crew, down to my outerwear. With all due respect, I am the captain you want getting you safely back to the harbor because I have done it so many other times.
This storm may feel unprecedented; I suppose any raging storm may feel different and unique as you go through them. I no longer have as fresh a face as I did when I started; I have a lot more silver in my hair and my whiskers are white, and no longer downy soft. These are signs of the gained experience over the course of my career. If you look closely, you can see the battle scars and the steely calm in my blue eyes as I steer our vessel back to the safety of the harbor. This storm will also pass. The waters will once again calm while the sun returns as a reminder of better times. Together, we will enjoy those better times and prepare for the next unprecedented event.