Last year, I took a second to mention the Dow's breaking the 14,000 barrier in July. So I suppose at this time it is worthwhile to emphasize the other half of that message. It's ok for long term investors if stocks perform poorly in the short term. Don't panic! In fact, when in a period of decline, that's the best time to dump additional money for the long haul into equities. Just make sure it's really for next decade, not next week. Your emergency fund should never leave your savings account.
How much has the market (or more accurately, several markets) crashed? From breaking 14,000 last July, we're back under 13,000 now, almost below 12,000. In fact, what's happened the last few weeks is the largest decline in the history of the DJIA. By comparison, the crash of 1987 was less than a thousand points. Since then, the Dow has risen by almost exactly 10,000. In other words, a hypothetical investment in the 30 companies would have sextupled in the 20 years from Black Monday to LameduckW. Okay, LameduckW may not be the word historians ultimately use for the markets under Bush, but until they come up with a better name for this crash, that's what I'm calling it. But what if you bought the day before Black Monday? Well, then you'll have to console yourself with only a quadrupling of your money from 1987 to now (unless you got emotional and sold your investment, in which case you had quite the loss).
All of this, if you're like me, screams buy! If a Democratic president enters the White House come January 2009, we are primed for some impressive gains the next few years. Youngun's especially, take advantage.
And one side note. The National Association of Realtors, the lovely lobbying organization designed to market buying and selling houses (as opposed to making sure everyone has housing) and ensuring one of our most regressive tax breaks stays in place, the mortgage interest expense deduction, is running ads advertising a rather misleading website. They make some ridiculous claims about the historical appreciation of houses, and of course, the data they cite is their own historical series survey that you have to buy from them. Obviously, the reason they don't cite the data is because it's based upon the height of the housing bubble, not the long-term historical record that shows houses appreciating about half a percent a year above the inflation rate, much less than the doubling every 10 years they claim (which requires over a 7% annual gain). Plus, of course, these are all gross figures; they are not net of the costs of homeownership. Homeownership is valuable mostly because people like owning their home. Few people treat their homes in the emotionless, rational state necessary to count as an investment.
But what really is offensive about the website is the use of statistics about the distribution of wealth. They accurately point out that homeowners as a group have a much higher net worth than renters. Having a net worth of "46 times that of a renter" is most definitely not a benefit of home ownership, though. It's a benefit of higher wages and a longer working career. In fact, their observation is precisely why we should eliminate the tax breaks for homeowners. People who earn money to buy and sell property obviously want you to think that owning a house is more valuable than renting one. But that doesn't mean it actually is, and it certainly should rouse suspicion and scrutiny when a lobbying organization is making such blatantly misleading statements at a time when the market it represents is in the bust phase of its bubble.
(P) I hadn't originally intended that little disgust with the NAR as a segue from the market's ups and downs to Senator Edwards' ups and downs, but it seems pretty appropriate. I was very excited yesterday to go see John speak at the Carpenter's District Council building. For one thing, I'd driven past it a hundred times, but I'd never been there. It's interesting living in a town that actually still has a union presence. It was also a reminder, that I say only half-jokingly, that lots of white people live in the city, too. It was almost unbelievable, I'd say 3/4 of the people who packed into that meeting hall were older than 40 and white. They still exist!
I really liked his stump speech, and that was really the first time I've been around a large gathering of Edwards supporters. Mostly it's been smaller groups, like what we did at Earth day or greeting him at the National Urban League conference. In my mind, Edwards is saying the right things and has the right approach.
Clearly, though, Nevada did not go very well yesterday for Edwards. It makes me wonder a bit if they started campaigning elsewhere because they knew that was going to happen. With two third place finishes in a row, it's worth asking what is left to get accomplished. While finishing third in the Republican race any given day isn't a big deal, the Democratic side is a little more consolidated at this point. That itself is quite interesting, since the corporate media likes to talk a lot about fractures in the Democratic party when the GOP is really what is splintered at the moment, but that's a slightly different topic.
What stands out to me is that there's no reason not to keep going. For one thing, Clinton has not been able to stake out a majority position, even as she borrows some of the ideas and language from the Edwards and Obama campaigns. She hasn't won a majority of delegates in any state so far (unless you count Michigan, which is actually embarrassing for how few votes she received), and in fact, Edwards beat her, at least in terms of votes, in the Iowa caucus (you don't really know for months the actual delegates each candidate will get). If Nevada is a sign of things to come, then obviously Edwards isn't stealing votes from Obama. If it was an aberration, then it can't be a reason to ask Edwards to leave the race. The longer he's in, the more he has a chance to shape the dialogue and influence the convention. And of course, he just might win a few states.
That leaves me with the most interesting question I have after this weekend. Why do some people want him to drop out? Do they not like his message? Do they think he's preventing Clinton from getting more votes? Do they think he's preventing Obama from getting more votes? Do they not like having a broader field to choose from? Does Edwards' continued presence allow him to raise uncomfortable questions that people in the media or the party don't want asked? If a majority of voters want Clinton or Obama to be their nominee, then I'll respect that. But what I don't understand is telling a guy he needs to drop out after only three states have voted, in one of which he beat Clinton.
I hope Edwards picks up some states in the next few weeks. But I'm quite sure it would beneficial for him to stay in the race through the convention, even if he doesn't win a single state.
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