Note: This is my syndicated column, written last week, and published across the country on Monday, March 23rd.

America, and the world, will get beyond this social and economic crisis eventually. Meanwhile, it’s almost cynical to be talking about the financial markets. But, there are lessons to be learned from the past when it comes to the financial markets.

There’s nothing like living through a bear market to give you respect for this force of nature, of human nature. I’ve lived through several, and it’s given me perspective.

Money Heaven
My first bear market experience was on the trading floor of the Chicago Board Options Exchange, where I was a founding member and the first “girl” trader! The Dow Jones Industrial Average was trading above the 1,000 level – an incredibly symbolic number those many years ago.

The first options to be traded on the CBOE were on a group of stocks called the “Fabulous Fifty” – the growth stocks of the future. Everyone assumed they could only rise in price. They were the “tech” stocks of the day like IBM and Digital Equipment, and the “consumer” stocks of the day like McDonalds and Avon Products. In fact, the floor was such a sexist place in those days, this group of stocks was labeled “The Vestal Virgins”, the untouchables.

Then along came the bear market, which took the Dow to an inter-day low of 570.01. Yes, I remember the intra-day low, down to the last digit! All those “Fab Fifty” stocks came tumbling down, many from over $100/share to the low 20s and ‘teens.

It astounded me. I turned to an older trader standing there on the floor, assuming from his gray hair that he would have the answer to my question:
“Where did all the money go?” Without hesitation he replied: “Well, my dear, it went to Money Heaven!”

No one questions the rise of the stock market or the wealth it creates on the way up. But when wealth disappears, it comes as a mystery – or even a conspiracy — to many people.

Once a company sells shares to the public, there is a fixed number of shares outstanding. So when the market price falls, ALL of the shareholders lose money. Yes, there are a limited number of “short-sellers” in the market – those who sell shares they don’t own, putting up margin money to do so, then planning to to buy the shares back at a lower price to make a profit.

But short-sellers are a tiny fraction of the investors at any one time, and their activities are strictly monitored. Other than that, no one “wins” when the market falls – except those who have cash and are able to buy stocks at lower prices. The wealth has simply evaporated — gone to Money Heaven!

Beware of Bonds
Here’s another lesson that comes from long experience in the markets. Those of you who are feeling smug about having allocated a good portion of your retirement assets to bond funds might want to think again. More than a month ago, I wrote a column on this subject, and it is available by scrolling through recent columns at my website.

In it I pointed out that in a recession, many of the bonds in your bond fund carried juicy yields because of the concern they wouldn’t be able to pay the interest in a recession. Look inside your bond funds. Do you see bonds of airlines, retailers, energy companies? Now the recession is upon us. If those bonds are downgraded or fail to pay the promised interest, the price of your bond fund could fall as sharply as your stock fund.

”Chicken Money”
And that brings us back to the concept of “chicken money” – money you cannot afford to lose! It’s a name I created many years ago – urging those who must avoid risk to keep an appropriate portion of their money in bank CDs, money market funds, or Treasury bills.

Search the term “chicken money” under columns at TerrySavage.com for a full explanation. You don’t earn any interest these days on chicken money. But you won’t lose any money either.

Finally, remember this Savage Truth: “Good judgment comes from experience. And experience comes from bad judgment.” That’s how I know. And that’s The Savage Truth.