March 9th, 2009.
A day that began like most other March days in Northwest Ohio.
Brisk.
Sunny.
Too cold to put away the winter coat.
Too warm to keep it buttoned.
I departed from my house that morning kissing my wife and my 3- and 1-year old daughters goodbye. They’d go about their normal routine that day with their mom. Doting around, playing, making too much noise, napping, ‘helping’ mom with a chore or two. They weren’t old enough to know exactly where I was going each morning at 7am, but they were confident I’d return that evening, and they’d be excited to see me.
What they didn’t know was that for the prior 18 months, the stock market was in a steady decent, losing over 50% of its value from October 2007 until it finally bottomed.
And bottomed it did. On March 9, 2009.
Our firm sported a part-time administrative assistant at the time, the phone rang that morning. It was Adam’s client, and he took the call. Our office was small enough I could hear him talking, but I was busy with my own work and didn’t pay attention to the conversation. Several minutes later, Adam popped down to my office to tell me about the call.
“That was Doug.” he said.
“Oh ya? What’d he want?” I inquired.
“He wanted to go to cash.” came the response.
Going to cash is a last-ditch effort by someone to stop the bleeding, to exit the stock market in hopes to save what little remained after the crash. To his defense, his portfolio was over $1 million in late 2007. He just received his February 2009 investment statement, and it was down to a mere $600,000. Our prudence hadn’t lost him as much as the market, but losing over $400,000 isn’t fun no matter how you justify it.
“What’d you tell him?” I asked.
“We’ll, I told him about some of the recent research we’ve been discovering, that we’re seeing some green shoots in different areas of the economy, that there’s reason to be hopeful that the worst is behind us. I told him it isn’t a ‘loss’ until you sell. If you sell, you fall victim to the big mistake, which is selling at the low. I also told him that by going to cash, you have to get it right twice, once on the way out, and then again on the way back into the market. No one can time it right once, let alone twice.” Adam said.
“Great advice! So, what’d he decide to do? ” I asked.
“Unbelievably, he took my advice. He’s staying invested.”
“Wow. What if we’re wrong? What if he loses even more?” I asked, unsure if our research was too good to be true.
“Integrity. We do the right thing with the information we have. As of now, we’re seeing some signs of relief of selling in the markets. We’re seeing signs of life in the economy. We’ve got to be near the bottom, these stocks, these companies aren’t worthless. They’re producing goods and services that are improving the way we live, work and play. We’ve got to act with integrity on the things we’ve researched and believe to be true.”
“Agreed. Great job handling that client, Adam! Let’s hope we’re on the right side of the trade.”
In hindsight, we were. Not knowing that day, March 9, 2009 was going to be thee bottom, we prevented a client from making a really bad decision…going to cash and not allowing the market to make up for its losses.
Fast forward to today, and at the time of this writing, Doug is still a client. And that account that bottomed at $600,000? It’s now worth over $4 million. And that in spite of many other cataclysmic events since 2009. Wars, pandemics, political turmoil, assassination attempts. The market grinds upward.
I arrived home that evening, not knowing that at the 4pm market close, the bottom was in. I walked through the door, my daughters came running to greet me. “Daddy’s home! Daddy’s home!” I gave them each a hug. It had been a tough day at the office. Another client called later that day to go to cash as well. We talked him off the ledge too. For the last 18 months, we’d been seeing our clients hard-earned money decline before our eyes. It wasn’t fun. But, it was an important lesson. The education we received each day of the Great Financial Crisis, no university can replicate.
We were there.
We learned.
We’re still investing our client’s hard-earned money today.
Selling at the low is never the goal.
Stay calm. Stay invested. This too shall pass.
