Saturday, June 28, 2008

Looking Back

Remembering where we have been every now and then is always a good idea. Birthdays, anniversaries, reunions, etc. all seem to bring back memories from days gone by.

Today, I will attend the 60th anniversary party of my grandparents, so I thought this was a good time to reminisce about how things in the investment world have changed over the last 60 years.

On Saturday, July 3, 1948, the Dow Jones Industrial Average was sitting at 190.06. The 30 Dow stocks looked quite different, but there were a few familiar names - American Tel. & Tel. (AT&T), DuPont, GE, GM, Proctor & Gamble, Standard Oil of California (eventually become Chevron), Standard Oil - NJ (eventually become ExxonMobil), Texas Company (became Texaco then merged with Chevron), and United Aircraft (became United Technologies). To tell you how long it has been, one share of GE in 1935 would have been $35.05... fast forward to 2005 and that 1 share would be worth $10,094.40... These titans of industry were the building blocks of the economy both then and now. Can anyone really imagine not having a GE, GM, AT&T, or ExxonMobil?

In 1948, the Dow Jones was dominated by commodity type companies like both Standard Oils, National Steel, International Nickel, Bethlehem Steel, American Smelting, U.S. Steel, and American Can. Today's Dow looks to be much different and diversified - 6 diversified industrial material companies, 5 financial firms, 4 tech firms, 3 commodity firms, 3 retail firms, 2 telecoms, 2 industrial companies, 2 medical firms, 1 chemical, 1 auto, and 1 entertainment firm.

The NASDAQ was still over 20 years from starting (1971), the world wide web (WWW) was not even a thought (1991), and the biggest issue of 1948... the presidential election where Truman beat Dewey - yes the press had problems with elections back then too.

There have been eleven different U.S. Presidents during the time, but some things still haven't changed... Congress was still arguing about taxes and Social Security. There have been 5 wars (Korean, Vietnam, Desert Storm, Enduring Freedom, and Iraqi Freedom) and countless skirmishes. The Cold War ended, and capitalism and democracy spread globally.

Today the Dow sits between 11,000 - 12,000, the economy is no longer a regional or national one but a global one, and as the US and world has changed, so has the Dow and investing. The main lesson here is that being invested for the long term, no matter how bleak in the short term, will pay off handsomely.

Much has changed over the past 60 years, but it was with forethought and determination that the men and women of the business world grew our economy and our nation into the financial leader of a global economy. The next 60 years will change even more, and who knows which companies will lead us into it. The one common thread will be adaptability and creativity of the financial market.

Happy Anniversary Robert & Gladys.

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