Quarterly Thoughts – Q3 2011

By the first half of 2011, after a post-crash jump in investment prices, many disciplined investors felt a material level of financial and emotional recovery from the 2007-2009 credit crisis market. The third quarter of 2011, however, was a reminder that the bumpy road to full recovery is not yet over, as the world slipped on Greece (how about that pun!?). Small economies can sometimes be the tail that wags the dog if there are concerns about “economic contagion.”

Dramatic headlines in the press are not unique to events Greece, and often mirror the markets concerns:
• “The stock market has scarcely been so shaky since 1929. Just about everyone who sells, borrows or invests has that overall feeling of unease.”
• “Banks and insurance companies are tottering beneath huge portfolios of bad real estate mortgages.”
• “All sorts of people who never thought they’d be on the jobless lines…are looking for jobs and not finding them.”

These Time Magazine snippets aptly capture common concerns and uncertainty regarding our current environment, and suggest that “it’s different this time.” However, these quotes are not from recent years. Rather, they are from January 1976, October 1990, and January 2004, respectively. When each of these headlines ran, the Dow-Jones Industrial Average was under 3,000. The Dow today is well over 11,000, and is up approximately 80% from the March 2009 market low, despite the bumps during the most recent quarter.
The lesson… short-term concerns iron themselves out over time and it pays to maintain a long-term perspective as an investor.