The Dow closed above 13,000 yesterday for the first time since May 19, 2008 — before the bailouts, bank failures and millions of layoffs resulting from the financial crisis/recession. That’s very good news. But, predictably, someone with products and services to sell said something stupid about it.
“I think it’s a momentous day for investor confidence,” said Jack Ablin, chief investment officer at Harris Private Bank. “What this number implies is that the financial crisis that we were all losing sleep over, it never happened, because now we’re back.”
The financial crisis “never happened”?!?
We have suffered huge societal damage over the past few years that remains uncorrected. Many companies no longer exist. Unemployment is scandalously high and far, far worse when those who have given up on finding work are factored in. Real estate prices remain depressed. Fed interest rate action to try to stimulate the economy has made life very difficult for those looking to save money in a way that protects their principal. Many are terrified of the markets and unwilling to invest, even when they should. The list is a long one — much longer than the one I have provided here.
But even if we ignore those consequences we aren’t anywhere near “back.”
What about the opportunity costs during the period from May 19, 2008 to date? Those costs have been enormous.
Retirees taking income from their investment portfolios for day-to-day spending needs are hardly back to where they were in 2008. They remain deep in the read. For some, their ongoing retirement is at risk and many have been forced to go back to work (if they are lucky enough to find it) or to sell their homes in a badly depressed market. Many others (understandably, and often at the advice of their advisors) panicked in the months following the crisis and sold out, leaving them still far in the red.
The market has performed very well so far in 2012. I hope it continues. But to suggest that we’re anything like “back” just because the Dow has reached 13,000 again is preposterous and downright insulting to the many who have suffered tremendously and continue to suffer as the result of the financial crisis.
We’re not back. Not by a long shot.
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