There are some moments that mark your life, moments when you realize nothing will ever be the same. And time is divided into two parts, before this and after this. – John Hobbes (Fallen)
In the summer of 1977, my mother, brother, and I made our much-anticipated annual trip from our small East Texas hometown to the Dallas-Fort Worth Metroplex to visit my aunt and uncle. The big city offered us the opportunity to see and do things that weren't normally options at home, but the highlight was always a visit to our version of the happiest place in Texas (sorry Walt), the Six Flags Over Texas amusement park.
On the morning after Six Flags, I heard my aunt and mother discussing what we were going to do for the remainder of our stay. The plan for that day was to head to the shopping mall to buy back-to-school clothes for me and my brother. Coming from a small town with only a couple of department stores to choose from, the idea of literally having dozens of places to shop for deals under one roof was exciting…. for the adults.
My brother and I, however, weren’t eager to spend the day trying on new shoes and blue jeans. My aunt, noting our lack of enthusiasm, pulled out the newspaper and suggested we pick a movie to go watch at the mall theater. I recall that the listings took up an entire page of the paper. In the middle of the page there was an advertisement that included the image of what looked like a dark robot wearing a gas mask and German storm trooper helmet.
We had no idea what Star Wars Episode IV: A New Hope was about, but Mom thought Smokey and the Bandit may be a bit racy for my 7 year old brother. That narrowed our choices to Benji, Herbie, or the cool looking "robot". Little did we know that after the trip to the mall that day that nothing would ever be the same.
In the days before VCRs, DVR's, and Netflix, the movie experience was more than an activity, it was an event. Star Wars was one of only 54 movie releases in 1977 per the movie data website, The Numbers®. Compare that to this year, where 83 movies were released, in JANUARY.
Watching a movie today is almost as routine as watching reruns of The Brady Bunch was not so long ago. Now, with so many more flicks to choose from coupled with the ability to stream just about any of them through our home theaters or various other devices, it’s not that unusual to realize that you've already seen a movie after the first scene or two.
This week, that familiar feeling came over me while watching a business channel. The headline flashed that the Fed had “surprised” markets by raising rates for just the second time in a decade, boosting the rate that banks can lend each other money overnight from .5% to .75%. The stock markets soon lost about 2% of their value, mostly attributed to the rate increase.
There were plenty of commentators predicting the calamity that would result from this “unexpected” increase in rates. Then I realized why it felt like Déjà vu when I looked back at the Accountable Update I wrote about this time last year. In the 12/18/15 installment titled Staying Out of Trouble, I noted that the Fed had just raised fed funds rate by .25% and that they anticipated additional moves by up to 1% in 2016. Sound familiar?
The same people on the business channel were saying the exact same things they said last year, “Get out of bonds! Buy a house now before higher rates make them unaffordable! Don’t invest your cash, wait for higher rates! This is the beginning of the end! Buy gold before it’s too late!”
Eventually, the broken clocks will be right, for a moment. We prefer to have a plan for each of our clients that relies on evidence instead of guesses. The odds are this isn’t a defining moment that we will look back upon one day. It’s much more likely that this is just another movie that we’ve seen before. If you would appreciate a more in-depth look at some of the evidence, please enjoy the following Issue Brief from DFA’s, Doug Longo.
If not, head to the mall. There are only 9 shopping days until Christmas!
