上世纪90年代末，作为爱德华兄弟投资公司资深产业分析师，几乎隔三叉五都要写几篇关于全球股市和跟踪的高科技产业(主要是半导体和电子计算机)方面的文章，供基金经理和大众投资人参考。这些在当时的市场环境下所作的分析至今读起来，仍然感触颇深，仿佛发生在今天，回味无穷。
下面是1997年9月8日的一篇文章，如果有时间，还将陆续登出一些过去的但对今天金融危机和科技危机有借鉴的分析性英文文章。
When written in Chinese, the word “crisis” is composed of two characters. One represents danger and the other represents opportunity.
Investors need to be mentally prepared for the next 500 point drop in the Dow Jones Industrial Average (DJIA). A 500 point drop in the Dow from the 8000 level would be the equivalent of a 6.25% decline. Stocks have declined by this much (or more) on a single day 22 different times this century.
The average Bear Market since 1950 has resulted in a 24% decline in stock prices. With the Dow near the 8000 level, a 24% decline equals nearly 2000 points on the Dow.
Despite all of the talk of a “new era” for the U.S. economy, we continue to believe that stock markets do not move in one direction forever, and that the U.S. stock market will experience difficult times again in the future. In fact, since 1950, the U.S. market has declined by 15% or more 14 times. There is no reason to believe this cannot happen again.
But the key to success in the stock market is not trying to predict when the next bear market will occur, it’s being mentally prepared with a game plan of what to do when it does happen. In that regard, we would like to refer back to the Chinese symbol of “crisis.” We feel every crisis in the stock market offers danger and opportunity to investors.
The Danger: The dangerous part is easy to understand. Investors who sell in a market decline and fail to get back into the market before it recovers will lose money. This was one of the most important lessons learned from the stock market crash that took place in October, 1987. Many investors remember that the stock market fell 508 points that day. Very few investors remember that the market also rose 186.84 points two days later and recovered its entire decline in just 23 months. Even market leaders like Coca-Cola fell 50% in October, 1987, so even buying high quality stocks is no “insurance” against a market decline. But for those investors who are tempted to sell quality investments in a market rout, remember: Bear markets are relatively short in duration, and have always been followed by a bull market. In fact, since 1950, the stock market has taken just 13 months on average to recover 100% of the loss experienced in the preceding bear market.
The opportunity: The second lesson of the crash of “1987” was the opportunity that is presented. Market declines are the long-term investors’ best friend for they offer the opportunity to buy great companies at a bargain price. Market leaders like Coca-Cola, General Electric, and Johnson & Johnson have the tenacity to weather difficult times – their stock prices almost always recover to new highs in the inevitable recovery that follows.
Coca-Cola is our best illustration for these principles. Pity the investor who ran from danger, and sold his Coca-Cola shares on October 19, 1987 at 3.8125 (adjusted for splits). Envy the investor who bought the stock that day and watched it rise above $70 over the next 10 years.
An Illustration
Let’s also address the danger aspect of investing with a single stock that has a history of offering investors its own version of bull and bear markets. We feel words like volatility, or beta, or standard deviation at times mask the true meaning of risk. To most investors, risk refers to the chance of losing money.
This table shows the high and low values of a 1000 share investment in Dell Computer, one of the technology stocks on our Model Portfolio.
Year Low High
1993 $1730 $6230
1994 5920 2390
1995 4930 12340
1996 5750 32180
1997 24930 88430
Any investor who was unwilling to hold the stock through this period of time, and stomach the (at times) gut-wrenching price swings in the stock would not receive the ultimate reward of watching his (or her) investment appreciate to more than 50 times the original investment. Yes, stocks at times are very uncomfortable t own, but the higher potential return that stocks offer is the extra “payment” that investors receive for holding through difficult times. To make money in a stock like Dell over the past five years, a shareholder would have to have been willing to watch his stake fall by more than 50% several times. Investors who sold at the first sign of trouble would lose money consistently in the stock.
We present the Dell example because of the tremendous enthusiasm for technology stocks today. We feel that much of this enthusiasm for technology stocks is justified, given the favorable outlook for growth. Technology is America’s fastest growing industry, and technology companies like Microsoft, Intel, Hewlett-Packard, Cisco Systems and Oracle are dominant companies that lead their respective segments on a worldwide basis. But investors need to remember the important lesson provided by our Dell illustration: Technology stocks historically have experienced very wide price swings. In fact, technology stocks typically drop twice is as much as the average stock in a market decline. Investors should understand this before they invest, and manage this volatility by only owning technology stocks with in a diversified portfolio.
Missing the Point
One final word on market volatility. Investors should not place too much emphasis on large point swings in the Dow. With the Dow hovering near 8000, 100 point days have much less significance on a % basis than they did when the Dow crossed 1000 fro the first time, or 2000.
100 point days
DJIA % Gain (loss)
8000 1.25
2000 5
1000 10
Yes, it is true that the recent 247 point drop in the Dow was reported as the “second largest drop since the crash in October, 1987”, but on a % basis, it would not even have ranked in the top 100 worst days on Wall Street.
The 10 year anniversary of the stock market crash in October, 1987 combined with recent wide price swings in the Dow Jones Industrial Average has focused attention on the possibility of a severe decline in the stock market. Once again, we reiterate our strong belief that no one has a crystal ball, and no one can predict short term stock market trends. The best investment strategy is to buy-and-hold good quality investments, and let the stock market take care of itself. By maintaining a long-term investment perspective, and recognizing the danger and opportunity that bear markets present, most investors shoulder weather, and may even benefit from the next inevitable storm in the stock market.
