Today I ask you to go on a quick journey with me, my friend Sherman, and his dog Mr. Peabody. Mr. Peabody is no ordinary dog. He’s built a little device that he calls the WABAC machine. It allows us to go back in time. Today, he’s set the date for January 8, 1999.
Usually he’s known for taking us to famous dates in American history like November 19, 1863 or July 4, 1776. This makes Mr. Peabody’s choice of January 8th, 1999 quite curious. You arrive in Boston, Massachusetts and take a walk around. You notice the mood is a little mixed. The locals are still disappointed from yet another Patriots playoff loss 5 days ago. Since the Celtics last won an NBA title in 1986 every season has ended in disappointment. You wish you could tell them to keep their chin up, better times in the world of sports are ahead.
You reflect for a minute where you are. The news is filled with gloom and doom about Y2K. It is business as usual at the World Trade Center. You notice two men talking and one says to the other that he’s going to get cell phone this weekend. He seems distracted as he is reading a Wall Street Journal about the latest round of Internet IPOs.
It is that last point that Mr. Peabody picks up on. He’s brought us to January 8, 1999 for a simple reason, the S&P 500 closed at 1,275.09. I ask Mr. Peabody, “Okay, but what’s significant about that?” He responds, “You may not realize this, but last Friday the S&P 500 closed at 1,271.50.” Sherman pipes up, “You mean that in more than 12 years the S&P 500 hasn’t moved significantly?” Mr. Peabody responds, “That’s correct. If you invested a thousand dollars in NYSE:SPY on January 8, 1999, you’d have approximately the same money as you did last Friday. The world has changed dramatically, but your investment would be more or less the same.” I thought to myself, “I’ve been doing better in Lending Club.”
On Monday I asked where I should do a 15-year Mortgage or the 30-year Mortgage. A decade ago, I would have gone with the 30-year mortgage and invested the difference in the payments in an effort to maximize my money. Today, I have less confidence in investing in equities. I went with the 15-year mortgage – it seemed to be the best move on so many levels.
Is anyone else feeling the same way? Are you bullish on investing over the long haul?