3JM Company Inc.
3JM Profile
Credit Dynamics
D&B Schedule
Publshed Articles
For More Info

Published Articles by David Balovich

Title: What Happened To The Market?
Published in: Creditworthy News
Date: 10/30/02

For many the decline of the stock market the past three years has had a negative impact. People have seen their retirement funds slowly dissolve, loans secured by securities have been called and for many businesses their equity position has plunged.

What will tomorrow bring and will the market recover? The answer is we don’t know for certain what will happen tomorrow but the market will probably recover because history has proven that it will. The following is an article I happened upon while doing some research for a client. For those of you with experiencing feelings of despair, you may find this of interest.

“To the question, what has gone wrong in the market? There can only be one real answer: The market came down because it had gone too high.  It fell precipitously, and for some people ruinously, because so many stocks had so far to fall before they would reach any firm and solid foundation.  It was such a vast bull market, rising so spectacularly, that anybody with eyes was bound to see it, and anyone with a normal quota of human greed was bound to hanker to climb aboard.  Over the past eight years, millions of new investors jumped into the market for shares listed on the New York Stock Exchange.  When they ran out of stocks on the Big Board or the American Stock Exchange, people turned to new issues traded over the counter.  There were new companies with untried management, small earnings and dubious prospects – with nothing but a prayer and a catchy space age name – which were bid up as much as 400% within a few months. 

From time to time some of the experts had their doubts.  “The reason stocks are so popular”, one securities analyst said, “is that we’ve got a whole new generation of investors who don’t know that stocks can do dirt.”  But the investors kept pouring in and anybody who wanted to have money in the market had to ride along with their optimism.  Those who showed the biggest profits were those who took the biggest risk.  Even some of the most astute money managers were finally persuaded that they could pay outrageous prices for stocks, on the assumption that the prices would go still higher. 

It is strange how rapidly, once the trend turns, an optimist can become a pessimist.  The glamour stocks began falling early last year, the more conservative stocks measured by the Dow Jones Industrial Average, in December.  They have since fallen steadily – and sometimes with such rapidity as to make front-page headlines, regardless of all business or political developments.  “ The market was badly in need of correction, “ a market analyst said self-critically, “the trouble was that we got away from any real study of security values and into a numbers game.”

This article was written in the summer of 1962, over 40 years ago, for Life Magazine.  At the time this article was written, the Dow Jones Industrial Average had plunged from a high of just over 700 to around 550 on May 28th, 1962.  The NASDAQ did not exist. Stocks not listed on the New York or American Stock Exchange were known as “over the counter” trades. Even with current conditions the Dow is trading at 14-15 times higher then it was in May 1962. Needless to say, things got better and if history is an accurate barometer it will get better.

I wish you well.

This information is provided as information only and not legal advice. Legal advice should be obtained from a competent, licensed attorney, in good standing with the state bar association.

This site is copyrighted (C) by 3JM Company Inc., Lake Dallas, Tx
Website by Creditworthy Co.