I am writing on Tuesday afternoon from Uganda in Central Eastern Africa, learning and hopefully helping in the work of His Voice Global. You can view their efforts at www.hisvoiceglobal.org. Today we learned about supporting local and refugee college students and helping them find worthwhile employment or to become entrepreneurs.
In the meantime, I see that Mr. Market is not finished throwing a selling tantrum. I could wish I had held onto the inverse (short) positions I wrestled with last Friday, but a new lower level for the S&P 500 has now already been reached! I am glad we have sold so many positions in the past month to save principal.
What are we to do? Since the technology and other high Beta sector stocks are so expensive by usual metrics, the situation of March 2000, may be helpful to see all will not be lost and opportunities still survive. As President Truman so wisely said, “The only thing new in the world is the history you do not know.” Let us consider what solutions exist for a stock market downtrend in an otherwise not too bad economy.
In the second half of 1999 when all adults and business people were buying new computer equipment so we would not die from the effects of Y2K—look it up, youngsters—the market exploded upward led by small sized growth style stocks as well as the already sizeable tech giants such as Microsoft, Sun Microsystems, and the like.
The tech and internet boom lasted for a few months, but Mr. Market finally awoke to the fact that these new companies (being valued based upon the number of eyeballs viewing their services online) were perhaps twice or thrice too expensive. Just perhaps the true value of AI may also be overvalued for the time being.
The winners of 2000, 2001, and after were the same positions lying in the dregs of moneymaking during 1999, long term government bonds and small companies of the value style (think the ones you would buy at garage sales!) One we made so much on is now deceased since it was the American Century 2020 Government Bond fund. But the second was the American Century Small Cap Value fund, still alive and well.
While the small cap growth funds went from top in 1999 to bottom in 2000, the Value fund rose by over 25% in both 2000 and 2001! As Jim Cramer on CNBC often reminds his viewers, Someone somewhere is always making money. This is one primary reason I would encourage you not to throw in the towel. Instead, pay some attention and simply rotate your investments to areas of better long-term value—cheapness if you will.
Watch for more in coming weeks as to what sectors and industries fit this description 25 years later. If you insist on selling everything you own except the money you rent out at interest, my advice would be to do it quickly. But then, you will have to someday summon the fortitude to buy stocks back just after the bloodletting has become unbearable for everyone else and they all sell.
Statistics available from Worden Bros., Inc., TC2000 Software, 2025
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)