Remembering why some prefer the mattress to the markets

October 29, 1998|By Kristine Holmgren

SIXTY-NINE years ago today, the stock market plummeted, sending the nation into the Great Depression.

Four days before the crash, President Herbert Hoover declared, "The fundamental business of the country . . . is on a sound and prosperous basis."

Like so many other good financial advisers, he was wrong. In the financial devastation that followed, more than 16 million shares were dumped. Billions of private investment dollars were lost. For almost 10 years the nation faced the consequences for years of spending, lending and buying. The boom was over.

Political implications

The financial anguish echoed throughout the economies of the industrialized world and led to the rise of fascism in Germany, Italy and Japan.

By 1932, one in four U.S. workers was unemployed. Remember, this was before such things as food stamps and welfare.

Until last spring, I, a baby boomer who grew up listening to stories about the Great Depression, had never invested in the stock market.

But then an exclusive mutual fund group opened its doors to outside investors. A friend gave me a nudge. Another gave me a hot tip.

Before I knew it, my money began to swim upstream into a high-yield, high-risk fund. Somewhere, in the great river of big bucks, my little cash flow was breeding with corporate funds, and spawning income for Santa.

I felt pretty smug about the whole thing. Until the market skidded.

I lost nearly 20 percent of my investment this fall. Not enough to lose my house. Just enough to crimp my kid's Christmas.

But don't cry for me, Merrill Lynch. I come from tough stock. Back in 1929, my mother was a single woman raising two children when the market collapsed. They made it through the night. No one in her family starved. No one in my family ever committed suicide over money.

Still, until the day she died, my mother never recovered from her worry over her family's financial future. The cost of my home offended her and my interest rates made her eyes water. But then, so did the price of a loaf of bread.

"It can't go on forever," she said. "Someone, someday will have to start living with feet on the ground."

The boom was over

In the months before the crash of 1929, some analysts warned that the buying spree, with prices 15 to 150 times above earnings, would have to stop. It did. But only after chaos and ruin.

Those of us who live paycheck to paycheck learned something from that gamble. We learned that corporations never make decisions to serve individuals. But individual investors can always change their minds about corporations.

My mother warned me about the stock market. For some reason, I forgot her good advice.

Never again. Next time I have cash to put away, I'm heading for the nearest mattress.

Kristine Holmgren is a writer and Presbyterian pastor in Northfield, Minn.

Pub Date: 10/29/98

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