optimistic fools

OPTIMISTIC FOOLS
I used to subscribe to Forbes financial magazine around ten years ago. Through the mid nineties when I was really, really poor, in the process of being buggered by the ex-wife who went on to become a pilot after I put her through school so the whole thing was more vindictiveness than financial survival, my monthly treat to myself was to buy an issue of Forbes and go to a coffee shop and eat a cheap breakfast in the middle of the night. It took at least an hour to read through Forbes and for that time, once a month, I could relax and enjoy myself. At the time Denney's still had $1.99 Grand Slams, and their Mom And Pop competitor I went to had an even cheaper special that included coffee. Back when gas was a buck a gallon, an SKS in the pawn shop $99. When trailer rent was $175 a month. A few years later when I'd gotten back on my feet somewhat, I started subscribing to Forbes. I've always liked the magazine.
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Of course I no longer subscribe, even though I could easily afford to. They are such corporate cheerleaders I can't stand it. And of course it colors their viewpoint. You can't point out that we are all going to die when your readers are suits and your advertisers depend on Greater Fools investing. Yet even given that, I couldn't help but think what optimistic fools they were when I came across an October '08 issue at the library free magazine rack. Page 52 had a graph depicting the Dow and how much value it had lost over the last century. A decline of 89% during the Great Depression. 42% during the early '70's oil embargo. 33% October '87. A mere 17% decline when LTCM went under in '98. The Dot Com bust saw a loss of 34%. And the housing bubble through last fall saw the Dow down 21%. The graph was screaming out how safe we were since we were so far from the declines of the Great Depression. Now, fast forward to February 2009. The Dow has lost just under a shade of 50%. That is worse than the '70's oil embargo. And over half way to the losses in the Great depression.
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And here's another little factoid for you. The Great Depression loss took three years. We are over half way there after just one year. And the Thirties were better than today, economically. We were on the gold standard, the world's oil exporter and the world's bread basket ( with a decentralized, non-oil dependant farm economy ). Today, we are a real estate, financial, entertainment economy going down fast. Yes, the Dow is not the only measure of the economy. In fact it isn't really the best one at all. But as long as we are measuring apples to apples, we can make a good case for things getting as bad as during the Great Depression far faster ( of course they will get worse, but I'm just refuting the Forbes happy happy joy news right now ). Taking their housing crash start date of October '07 and the Dow at 13,930 and the current 7,930 ( roughly, it will be different as you read this ) you get a decline of 57% for the housing crash. Not the 21% they are advertising. That's 65% of the Great Depression decline if fifteen months.
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Optimistic fools.
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