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Jewish World Review March 20, 2001 / 25 Adar, 5761

Cal Thomas

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The sky is not falling

http://www.jewishworldreview.com --
Chicken Little Democrats are clucking that the financial sky is falling and it's all President Bush's fault. The talking points have gone out from Terry McAuliffe, Chairman of the Democratic National Committee: Blame Bush for the stock market decline, layoffs, polluting the Earth, lying to members of his own Cabinet and not even living up to his father's administration (which Democrats also unfairly maligned). That's quite a record after just two months in office.

To mix metaphorical stories, pay no attention to those chickens behind the curtain. The sky is not falling and the Democrats, who haven't had a new idea, much less a good idea, in many decades, are wrong about the economy.

Whenever I want sound financial advice, I don't go to politicians. I turn to Ric Edelman, who is my financial advisor, and a best-selling author and broadcaster. Check him out on "Oprah'' this Friday (March 23), or visit his Web page (www.ricedelman.com). (I receive no goods or services for this unsolicited plug and pay full fee for Edelman's services.)

Edelman's view of the recent decline in the stock market is an Alfred E. Neuman-like "What, me worry?'' It's nothing new, he says. It's part of a cycle, like winter storms that come before spring and summer.

He's placed some valuable information on his Web page that should dispel any notions of panic for wise investors -- meaning people who have avoided speculation in high-risk tech stocks and who purchased safer and more conservative balanced mutual funds.

On a chart titled "How Often Does the Dow Decline?'', Edelman revisits 100 years of market activity between 1900 and 2000. He finds a predictable pattern of decline, rebound and advance. Over that period, says Edelman, the market experienced a drop in value of 5 percent or more 328 times, each lasting an average of 40 days and occurring about 3.3 times per year. A 10 percent decline occurred 108 times during the last century, lasting an average of three and one-half months each time, and occurring about 1.1 times per year. A 15 percent or more drop happened 51 times, lasting an average seven months each time, and occurring once every two years.

The market dropped 20 percent or more in the last century 29 times, lasting an average of one year and affecting the market once every three years, Edelman notes. The latest decline began about a year ago.

Just as interesting is another chart on Edelman's Web page called "Bull and Bear Markets,'' which records upward and downward trends in the Standard and Poor's 500 Index between 1949 and 2000. (The S&P chart generally follows the trend of the Dow.) There was some decline, lasting for brief periods, Edelman indicates, but most trends were upward with the periods of growth lasting much longer than the relatively brief periods in which there were losses.

Most of the recent drop in the stock market has been fueled by the tech stocks, which were overvalued in the first place. Federal Reserve Chairman Alan Greenspan repeatedly warned about this, noting that there was no logical reason for the market to head toward the financial stratosphere when company earnings did not justify such speculation.

The media haven't helped. First, they hyped tech stocks. Now, in an effort to boost their own declining ratings, TV reporters and commentators are engaging in alarmist reporting. Such "reporting'' is more befitting of 1929 than 2001.

Besides, notes Edelman, most people don't have all their assets in stocks. That's too risky, something like driving a car without insurance and betting you'll never have an accident.

For wise investors who don't gamble with their retirement future by purchasing risky stocks and bonds, and who are investing for the long haul, not a drag race, the recent downturn in the market will be seen for the adjustment it is. In fact, those who are financially far-sighted are probably calling their own financial advisers and asking if this wouldn't be a good time to invest. Some of them are probably Democrats.

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