The Tao of the Dow

Interest rates go up. Interest rates go down. That is the Eternal Way.

Published August 21, 2001 6:15PM (EDT)

The Federal Reserve's decision to lower rates by a quarter percentage point on Tuesday -- the seventh cut this year -- has touched off another round of speculation about its effect on the stock market. But the market, and the Dow in particular, has resisted efforts to control it for a very long time. Today's wise investor must become like the ancient Taoist masters, and learn the value of Doing Nothing.

The Dow that can be named
is not the eternal Dow
It is the Industrial Average.
All things arise from the Dow
The S&P 500, the Russell 2000, the Wiltshire 5000
It is the Great Mother of all indices

Rising and falling is the essence of Dow
Stand before it and there is no beginning.
Follow it and there is no end.
Try to grasp it, and it drops more than 100 points
in heavy trading.

Advances and declines arise together.
Highs and lows rest upon each other;
Bear follows bull
Bust follows boom
This is the Eternal Way
But few investors understand its essence.

The ancient Master
Is one with the Dow
For want of a better name
We call him Greenspan.
The Master
acts without speaking
Quarter point, quarter point, quarter point
Where will it end?
Mystery of mysteries

That which expands
Can be shrunk.
That which is strong
Can fail.
That which is raised
Can be cast down.
Just ask Amazon.

The wise investor does nothing,
Content to observe the Dow as it rises and falls
Oversharpen the blade, and the edge will soon blunt.
Amass a store of new economy stocks
and nothing can protect you.

Being fully mindful,
Can you be as a first-time investor?
Cleansing the vision,
Can you be without stain,
As though viewing CBS Marketwatch with new eyes?
Understanding and being open to sudden downturn
Are you able to accept your fate?
This is the Primal Virtue.

The 30 industrials blind the eye.
The 30 utilities deafen the ear.
The 30 transportations dull the taste.
The 30 brokers insist there's nothing to worry about
The racing bull maddens the mind.
And chaos is loosed upon the market.
Better to become one with nothingness
Like Lucent.

Accept disgrace willingly.
You bought Cisco at 79?
What the hell were you thinking?
Accept misfortune as the human condition.
Do not be concerned with loss or gain
Even when your spouse starts asking where the money went.

The ancient investors were subtle, mysterious, profound.
They knew the wisdom of buying and holding
The ten thousand stocks rise and fall while the Self watches their return.
Knowing this, you will attain the divine.
Being divine, you will be at one with the Dow.
And though the body dies, your portfolio will survive
Thus, the Dow will never pass away.

Knowing the market is wisdom,
Knowing the self is enlightenment.
Mastering others requires force,
Mastering the self requires strength.
He who knows he has enough is rich.
He who doesn't know
Is stuck with a lot of Yahoo stock

A superior athlete leaves no tracks
A superior speaker makes no slips
A superior broker stops calling when you're tapped out
When the way of the Dow is forgotten,
Speculation and irrational exuberance arise
The root of all suffering.

Do you think you can take over the market and improve it?
I do not believe it can be done.
The Dow is sacred.
You cannot improve it.
If you try to change it, you will ruin it.
If you try to manipulate it, you will go to jail
Unless you have friends in high places

Without going to Wall Street,
you may know the whole world.
Without stepping onto the trading floor,
you may see the ways of the market.
The more you invest, the less you know.
Therefore the truly wise investor dwells on what is real
and not what is on the surface
The fundamentals
not the closing price.

Those who know
do not talk.
Those who talk
do not know.
Therefore, avoid financial message boards.
Give up easy profit
And it will be a hundred times better for everyone.
Buy and hold
That is the Eternal Way.

By Tom Mcnichol

Tom McNichol is a San Francisco writer whose work has appeared in the New York Times Magazine, the Washington Post, and on public radio's "Marketplace" and "All Things Considered." He is a contributing editor for Wired magazine.

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Alan Greenspan Federal Reserve