Downsizing, of the people variety, was especially hot early in 1996, thanks to AT&T’s January announcement that it was cutting 40,000 jobs as part of splitting itself into three separate companies. This was the quintessential downsizing story: many workers who had done nothing wrong would lose their jobs, AT&T’s stock soared, Wall Street hailed AT&T chairman Robert Allen as a genius despite his mistakes’ having contributed to the company’s need to fire people. ““I feel bad about it,’’ the seemingly clueless Allen said in a January interview, when I asked if he had thought of making a public, Japanese-style apology for having to fire so many people, ““but I don’t know what to do. I wouldn’t see any value of going on TV and crying and showing my sorrow for the world to see.’’ Oops. By the year-end, Bob Allen was a lame duck and Wall Street, which bid up the stock on news of the job cuts, changed course and made AT&T a dog. And it had become unfashionable to publicly boast of firing lots of workers, as AT&T and other companies had done for years. Witness the tiptoeing in the current Boeing-McDonnell Douglas announcement, which will clearly cost thousands of workers their jobs.
By contrast to downsizing, which still goes on but is now behind the scenes, the stock market’s swings are as public as ever. As I write this in mid-December, the market, as measured by the Standard & Poor’s 500 Index, including reinvested dividends, is up about 23 percent for the year, on top of last year’s 37.4 percent gain. If 1996 ended today–we investors should only be so lucky–we would have had the best two-year stretch in 20 years, according to data from Ibbotson Associates.
But the market is lurching wildly, and seems fragile and unstable. Those of us who’ve put money in stocks have had a good year, but it’s sure been exhausting. What’s also exhausting is trying to write anything useful about what we amateur investors should do about the market. I’ve said this a bunch of times, but I’ll say it again. For nonprofessional investors, the way to survive in the market is to have an idea of what you’re trying to do, stick to it, don’t get too happy when prices rise or too depressed when they fall. Unless you’re a slick trader, ignore talk radio, televised tickers and the new, magical mutual-fund formula propounded in your local newspaper or personal-finance magazine. To be a good investor, you have to go against the flow of popular opinion, take chances and pay attention. If you can’t or won’t do that, buy a mutual fund run by someone with a good long-term record. If you can’t pick such a fund, buy an index fund, preferably one with the lowest costs. I think index funds have distorted the stock market. But that doesn’t mean you shouldn’t buy one.
And on that note, a happy and healthy New Year to you. May neither your job nor your portfolio be downsized in 1997.
