The Five Most Expensive Words

Close your eyes, relax and then let these thoughts soak in:

"It's Never Been This Bad.."

These are the most expensive words I have known in my career. As we tend to do during times of stress, we
may have forgotten from whence we have come. Don't make this mistake.

In 1982, President Reagan was perceived as an idiot for cutting taxes, driving deficits to levels then never seen before and suggesting "the benefits would trickle down" to the rest of the country. Inflation was 15.5%, the
prime rate was 20%, unemployment was nearly 10% (again) and gold hit $850 an ounce driven by rampant fear as mortgages rose above 17%!

The Dow closed at 970 on my first Friday in the investment business. The general theme from smart investors
at the time was simple and to the point:

"Mike, you don't understand, it has never been this bad."

Later in the early 90's, when we had our last banking and real estate driven collapse, we lost over 1500 banks
and S&Ls, unemployment rose to nearly 8%, politicians were under fire, interest rates were 9% and inflation
was 5.5%.

At its low point in the early 90's, the Dow hit near 2300, still almost 3 times higher than in 1982 back when "it
had never been this bad.".

The general theme from smart investors at the time was again:

"Mike, you don't understand, it has never been this bad."

Today, the deficits are so high we struggle to get our brains around same. Inflation, well, it is battling hard with
deflation. Interest rates are near zero, mortgages are 4%, household income is at record highs, profit margins
are at record highs, cash on balance sheets is at record highs, costs of debt for growth is near record lows,
forward earnings are approaching record highs, gold is bantered about hourly and is approaching $1,400 even as unemployment rates are once again near 10%.

The Dow is fluttering around 11,500, almost 5 times higher than in the early 90's and nearly 12 times higher
than in the early 80's!!!

Yet, in the midst of it all, until just the last few weeks, the over-riding theme from smart investors has been, as
you may have guessed:

"Mike, you don't understand, it has never been this bad."

Three Good Lessons I've Learned Since 1982:

First, "It" has been much worse.

Second, the future is always cloudy.

Third, sometimes you are ahead, sometimes you are behind. The race is long-and in the end, it is only against yourself.

About the Author

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