Murray: It's a grieving process, but you can't grieve forever. And I think what you're watching now in the first week of October is, very clearly, that people are ceasing to grieve.
Simonoff: There are still scars.
Murray: Very much so. We'll never be the same. Apparently, people are getting on airplanes, and what I'm hearing is that the airlines are quietly beginning to call employees back. That's spotty, anecdotal evidence but I believe it.
There's some sort of normalcy creeping back into the equation. I don't think the economy is the issue any more. I think the war is the issue. I don't know what the war looks like, which is the point. But it is more or less political uncertainty rather than economic uncertainty. Would the scale of the engagement in Afghanistan be likely to change the implications for the economy over a two- or three-year period of this massive fiscal and monetary stimulus? I'm almost sure it would not. So what you have to deal with is the psychological implications.
For that, I think you're in kind of the same boat you were in in December of 1990 when there was a war starting six weeks. There was no doubt about that, you just didn't know how many body bags there would be. If a lot of body bags don't come home, the 1990-91 experience would tell you that this market would go up 30% without leaving a skid mark. In Desert Storm, you had 30% in three months. When you found out that Saddam's SCUDs couldn't hit the Saudi oil fields, and you found out that from a casualty standpoint it was virtually a nonevent, there was a buying panic. It's hard to see why this should be different. I'm not predicting the length of the war or the size of the engagement. As we sit here on October 4, the fiscal and monetary stimulus being applied to the economy will get it going within six months.
Simonoff: Up until September 11, there were several money managers who were saying they thought the economy was about to bottom, corporate profits were three to six months away from a bottom, that things were likely to turn. But they qualified that by adding that you couldn't really get a new bull market going until investors came to the realization that 10% or 11% a year in stocks was a good deal. Unfortunately, investors were still conditioned by the bubble mentality of the late 1990s. The bubble had burst long before September 11, but the bubble mindset still lingered. Do you think the events of September 11 may finally have shattered that expectations mindset?
Murray: Without debating whether the bubble mentality was waiting to be revived, there is no doubt in my mind that this puts a stake through its heart. The age of unreasonable expectations is over for this cycle.
Simonoff: People are realizing there are bigger issues in the world than getting 20% or 30% a year in equities.
Murray: Or how many stars your mutual fund has. In that sense, as horrific as it is to contemplate, this is the best thing that happened to financial advisors in 10 years.
Simonoff: Why?