Buy

Early in 1982, America had been in a recession for half a year. The U.S. unemployment rate was 9 percent and rising, and the Dow Jones Industrial Average was around 820 and falling.

This is when I invested for the first time in the stock market. It was a good decision.

Things were bleak in February 1982. Homelessness was an epidemic. Crime was increasing. In the Northeast at least, almost every road had potholes that state and local governments had no money to fill.

Oil was selling at $32 a barrel, up from $12 in 1978. Experts predicted OPEC soon would push the price close to $100 a barrel. The real estate market had collapsed. Even with a Freddie Mac loan, buying a home meant 16 percent interest, plus 2 points.

First shares. It was a moment to remember what pendulums do. On Feb. 20, 1982, I wrote this for a newspaper in Pennsylvania:

This month, for the first time in my life, I bought stock in a company.

It was easy. I just looked up “Stock and Bond Brokers” in the Yellow Pages and called my neighborhood broker. He took some basic information (like my name and the name of my bank). I told him I wanted 20 shares of Walt Disney Productions Inc. And faster than you can say bippedy-boppedy boo, I became a capitalist.

My broker explained that I had five business days to pay for the stock. Anxious that my initiation in the world of Wall Street be fast, I paid him the bill in one day. At $49.75 a share, the 20 Disney shares cost $995. The broker’s commission was about $35. Now I just sit back and wait for the profits to roll in.

The point is: it was all so easy. There have to be thousands of people out there who have never purchased stock simply because the stock market too often seems like a distant gambling resort for the rich.

Hey, you don’t need a lot of money. You can buy one share at a time of Walt Disney or AT&T or IBM or any company listed in the financial pages. Of course, you’ll probably pay a $20 broker’s commission to buy one share.  For one share, that commission is pretty steep. So it makes sense to buy several shares in one transaction; then the commission is relatively small.

Many economists are saying a person with some extra cash is better off today sending his money to money market funds, which pay very high interest rates, than putting his money in the floundering stock market.

Maybe so, but there’s something exciting about becoming part of an enterprise you have faith in. It’s possible, too, that stock prices are much lower than the stocks are really worth, and when -- or if -- the economy improves, the stock market could do very well.

Even if Walt Disney does not go up, and even if the year’s dividends are miserable, there is value simply in the process of investing and watching that investment. It’s not just learning something; it’s being involved in the other side -- the supply side -- of the economy.

Economist George Gilder, who is either a genius or a jerk, has another way of explaining why I bought Disney. The way he sees it, investing is altruism, because the investor never is certain of a profit, but makes his move based on what he believes others want and need.

In other words, investing is giving.

“The essence of giving is not the absence of all expectation of return, but the lack of predetermined return,” says Gilder. “Like gifts, capitalist investments are made without a predetermined return.”

So what I’m doing is giving people Disneyland, Walt Disney World, the Disney movies, Mickey Mouse toys, and anything else the Disney organization comes up with. If consumers enjoy my gift, they use it and I make a profit. If you decide you don’t want my gift, I’m sorry but I was only trying to make you happy -- and I take a loss.

Since this is my first investment, the novelty outweighs any concerns about its prospects. What can go wrong with Walt Disney anyway?

It’s possible that if I ever am able to invest more, I might begin to take this matter very seriously. I might start studying price-earning ratios. I might even get a stock market computer terminal, like the one my broker showed me. Then I’d use split second decision making to buy Chrysler on its way up and sell Exxon on its way down.

For now, I’m content each weekday to scan the financial pages for “Disney.” (Jiminy Cricket! It’s up five-eighths to 50 and an eighth!)

And this weekend, I’m urging all my friends to see “Cinderella.” It’s a good movie, really. It’s not free, but it’s my gift to you.

Morning in America. I couldn’t have picked a more depressing time to buy into the stock market. It wasn’t until mid-1983 that the economy showed hopeful signs of recovery. (President Reagan later joked that, around this time, the press stopped calling his economic policies “Reaganomics” because they seemed to be working.)

Ten years later, the unemployment rate was 7 percent and falling, home loans had an interest rate of 8 percent and falling, the price of oil had dropped to $19 a barrel, and the Dow Jones average was up to around 3260.

In 1992, Walt Disney was selling at the equivalent of $151.80 a share, more than triple the price I paid in those dark days of 1982.

The long expansion. Since 1982, the U.S. economy has grown so smoothly it’s been surreal. We’ve had two bumps in the road -- in 1991 and 2001 -- but we’ve done so well since the 1981-82 recession that few of us remember how bad a steep economic downturn is. Just as few remember how likely it is that even a shattered economy begins rebuilding within a year.

We’ll recover from this panicky recession. The Dow Jones probably will fall some more, but the economy will be back, and so will the Dow. As 1982 proved, when everything looks this bad, it’s time to buy.

Frank Warner

Update: Dow ends up 936 today.

See also: Buy.