First I’ll tell you why I’m celebrating the stock market crash, then I’ll celebrate the President!
Ten years ago in 2007 the stock market peak, then proceeded to tank 40% and the economy went into the Great Recession. On March 9, 2009, the QQQ traded at $25.74, the bottom. QQQ is an ETF representing the NASDAQ top 100 stocks.
Many panicked, sold at the lows and vowed to never again risk their hard-earned money in the “casino” called the stock market.
However if you weren’t recently retired and forced to take out distributions and just stayed invested in good quality company’s your have done very well. Fidelity Investments just published information comparing retirement plan savers who stayed with stocks grew their investments by an average of about 240%, that’s about 50% more than investors who bailed out of stocks at any point in 2008 or the beginning of 2009.
What did I do in 2008-2009, when many of my friends thought I was totally crazy? Here is a list of things.
- I felt just as bad and went sleepless like everyone else. But I didn’t panic.
- I did sell off some speculative stocks as they kept going down. This was to me just good housekeeping. Even today, as a buy & hold investor, if the story changes on a stock I own and I don’t like it anymore I sell immediately!
- I knew that some day top companies would rebound. I kept all my core holdings both stocks and bonds. Many of these I still own today.
- I didn’t have to check because I had always maxed out on my contributions to my work 401K plan. Unfortunately because of income restrictions I couldn’t contribute to an IRA (pre-tax). Many people were cutting back on their contributions
- I started buying as much blue chip stock as I could afford, GE for under $8, Microsoft at $16, etc. It was very painful at the time and I didn’t catch any of the lows. But by 2010 or so I was already up HUGE. Then as I re-balanced my portfolio I got wacked with significant capital gains taxes.
- Oh, by the way today the QQQ ETF trades for $151, an 600% increase over the bottom, not including all the dividends it paid.
So why celebrate, because I survived the 2nd worse recession ever, chances of another one like this in the next dozen or so years is pretty remote. Secondly, I didn’t panic and invested wisely. Today I use that same lesson to deal with the normal market craziness.
How did my business RainMaker Software do during this time? Actually pretty good. Early on in the downturn I clearly communicated to my employees, they were all afraid we’d have to cut back head count or reduce salaries, that unless we had a real catastrophe I wouldn’t lay-off anyone. If some one resigned or retired we would not replace them. I then told them that they (the employees) had to find ways to reduce some expenses so that we still made our profit share numbers for the year. Free daily breakfast at the deli next door would get reduced to Friday only, etc. The bottom line was that my team really stepped it up, so much so that we had record profits in 2007 and thereafter. We never missed a single management bonus or employee profit share payment. Happy employees do wonders for a business, I always knew they had the answers to all of our problems, many CEO’s would just never listen. I listened closely.
A Message to President Donald Trump
Dear Mr. President,
I voted for you, I wanted a business man to be president for once. So far I’m not happy with you being on Twitter (I’m not).
However, I couldn’t be happier that since you have become president my investments are up over 25%! This is with all the crap that is going on in Washington and all the fake news.
I’m also hopeful that if you can get a tax reduction bill through Congress, lower corporate tax rates, allow corporations to bring home about $3 trillion in cash my investments will compound by another 25%. That too would make me very happy.
Keep up the good work Mr. President as dysfunctional as it may appear.
A Buy & Hold Investor,