Saturday, September 22, 2007

My 25th Anniversary: Reflections on 25 Years in the Financial World

McNay on Money

My 25th Anniversary: Reflections on 25 Years in the Financial World

"For 25 years of touring, we remained partners, brothers, and friends. We keep it together because we think we could be big time before it all ends."

-Nitty Gritty Dirt Band

September 22nd marks the 25th anniversary of the day I joined the financial business. I was 23, right out of grad school at Vanderbilt, after a stop on the clean up crew at the Kentucky horse park.

The Dow Jones average was hovering around 1000, interest rates were in the double digits and we were in the midst of a horrible recession. Tax rates had approached 70% for some people.

Almost everyone told me it was a terrible time to get into the financial business. They were wrong. I started at the bottom and rode the wave upward.

My first clients, the few who would talk to a 23-year-old with no experience, did incredibly well as the economy improved and more opportunities became available.

It has been a very good run.

The defining moment of those 25 years was the 1987 stock market crash.

I had about 400 clients on Black Monday. I talked to almost every one that day and only four pulled their money out of the market. They got burned. The rest did extremely well and many are still clients today.

Although the stock market crashed in 1987, the bond market went dramatically up on the same day. People in fixed investments, like annuities or certificates of deposit, remained fixed. They did not lose any money or any sleep.

The 1987 meltdown was a great lesson. My clients learned to stay calm during fear and irrational panic. They learned the value of being diversified in the first place.

It was harder to communicate in 1987. We did not have email or the Internet. Only a few people had fax machines. I got my immediate news from cable television. I watched FNN, a forerunner to CNBC and Moneyline, with Lou Dobbs on CNN.

Many people did not know about the drop in the stock market until they read the newspaper the next day.

Today, very few daily newspapers carry stock market quotes. It is easier to track investments on the Internet.

This week, when the Federal Reserve got in touch with the real world and cut interest rates, the announcement made it around the world in seconds and the Dow Jones average immediately jumped over 300 points. If Bernanke and his crew had done something stupid, which had previously been their pattern, stocks would have dropped in that same warp speed.

The key to doing well in a rapidly changing world is having clear goals and sticking to them. I've been reading a tremendous book called Poker Nation and it had an interesting point. The key to success in gambling is the same key in money management. You have to ignore the ups and downs of each day and look at the long term trend.

Casinos keep making money as they know the long term trend favors them. Individual investors do well when they stay focused on the long term too.

Like the song says, if you keep it together, you might be big time before it all ends.

Like the Nitty Gritty Dirt Band, I plan on being big time and will give you another report at the end of the next 25-year run.

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