Wall Street in perspective: or, $1.2 trillion isn't as much money as you might think

Yes, the Dow Jones Industrial Average dropped nearly 778 points yesterday, the biggest point drop in its history, equal to $1.2 trillion dollars.

This morning Chris Cuomo, news anchor at Good Morning America, sounded like he'd been up all night drinking strong coffee. He kept nervously interrupting Congresswoman Marilyn Musgrave (R-Colorado) as she tried to explain why she had voted no on the bailout package and what she hoped would be included in a revised bill. Eventually Musgrave's fellow interviewee, Congresswoman Marcy Kaptur (D-Ohio), lost patience. With a motherly smile Kaptur, 62, leaned forward and lectured a sheepish-looking Cuomo, 38:

Let me just say that--now you're very anxious, I can hear your voice there. For the sake of the country, and even the sake of the markets, I think you should operate prudently and with a little bit of calm in your voice today.

Good advice for us all.

To put the excitement in perspective, let's compare yesterday's 7% loss to two other Black Mondays: 1929 and 1987. On Monday, October 28, 1929, the market lost 13% of its value, and on Monday, October 19, 1987, it lost 22.6%.

See? Things aren't so bad.

There. Now that we're breathing normally again, we can move out and get a broader perspective. A day makes a difference, but it takes years and even decades before we understand just what the difference is.

Black Monday 1929 ushered in the Great Depression. On September 3, 1929, the Dow had stood at 381.17. By mid November, it had plunged 40%. Nearly three years later, on July 8, 1932, it bottomed out at 41.22. That's a total drop of nearly 90%, and the Dow did not return to pre-Depression levels until 1954--25 years after the slide began.

In comparison, Black Monday 1987 was little more than a blip. Though it recorded the largest single-day percentage loss in Wall Street history, the market made a complete recovery within two years.

So what kind of tumble did the market take yesterday? A 7 percent loss on the day Congress refuses to bail out failing financial institutions doesn't seem all that significant. More ominous, perhaps, is the fact that at yesterday's close the market was down 26.8% from its all-time high of 14,164 less than a year ago, on October 9, 2007; or that it was down 21.9% year-to-date.

Time will tell, and I'm willing to wait a few more days or even weeks for Congress to try to sort things out (though I'm cynical enough to wonder if the folks who brought us this mess--whether in Congress or in the executive branch--are the best ones to get us out of it).

Meanwhile, if you're still anxious and unable to operate calmly and prudently, I have adapted a Sunday-school song for you. Mr Neff does not think it is funny.

Hear the dollars dropping!
Listen as they crash.
There goes our retirement.
There goes all our cash.

Dropping, dropping, dropping, dropping--
Hear the dollars fall!
Soon they'll be worth nothing.
Soon we'll lose them all.