You may have noticed, whether online or on business television, that there are quite a few folks who make predictions. They tell us what the economy is going to do, they tell us what direction the stock market is going to go, they tell us which direction interest rates are going to go, etc. Making predictions is fine, heck it’s their job in many cases. The problem I have had with these Kreskin’s (you younger folks look up Kreskin) over my nearly 40 years in the business is that very few, if any, are ever held accountable. Let me give you a present-day example. Many have been predicting a recession in the U. S. since early last year. About a year and a half later we are still waiting for the recession. Now, given that there are business cycles, there is always going to be another recession. So, if I say to you that there is going to be a recession, I will eventually be right. Is that how the game is played? Just stay consistent and eventually you will be “right’? Does it matter? Not really, I guess. But what bothers me is that investors are influenced by these prognosticators and usually not in a positive way. Many investors get caught up in the emotion/fear of dire predictions and do things in their portfolio that often are not conducive to their long-term financial well-being. Yes, stocks go down sometimes. We know that going in. And yes, there will be economic challenges almost all of the time. We also know that going in. But the simple fact is that the Dow Jones Industrial Average was at about 1000 when I started in the business. Today it is at more than 33,000. I’ll let you do the math. Which leads me to thoughts on how wealth is created.
Wealth is created by starting and growing a business, or owning valuable land, or owning great companies via public or even private markets. Wealth is not created by guessing, even correctly, what the next 10 days in the stock market look like- because you’ll probably get the next 10 days after that wrong. Looking at some of our accounts that have been with us for more than a decade and depending on when things were bought, I see things like Apple which is up more than 800% (1000% in some cases) over that time, or Costco up more than 300%, or Google which is up more than 300%, or TJX which is up more than 170%, or Nike which is up more than 200%, or Home Depot which is up more than 130%, or J&J which is up more than 170%, or Pepsi which is up more than 110%. None of those numbers include dividends. Do you see where I am going here? Sure, we buy companies that don’t work too, but if you stick to quality, it’s usually a matter of degrees. That path to creating wealth can be a rocky one. Ask any small business owner how many difficult times they had while creating their fortune. How many times did the real estate mavin see his property values decline during difficult economic environments? And yes, the folks who created long-term wealth via the stock market have seen many ups and downs over the years. But remember despite the choppy ride the Dow has moved from 1000 to 33,000 over the past 4 decades.
Finally, something caught my eye this week. Wealthy billionaire investor Carl Icahn via the Financial Times admitted that his bearishness (betting against the market) since 2017/2018 has cost him roughly $9 billion over the past six years. That’s a lot of money even for a billionaire. Were there down markets during that period? Sure, there were. Heck, just look at last year’s bear market. But even a billionaire money manager didn’t navigate the ups and downs too well, did he?
This is not an attempt to predict what the market is going to do next. Heck, we have been pointing out all of the difficulties that the economy and the markets have had to endure over the past year and a half too. Whether stocks go up or down over the coming weeks or months feels important, but in the long run, in terms of wealth creation, it’s simply entertainment. Ok, enough of my pontificating.
As for today, with worries that the knuckleheads in Washington D. C. will take us to the edge with regards to the debt ceiling battle, market participants weren’t very interested in buying into a weekend.
For the day, the Dow Jones Industrial Average was down 109 points to close at 33,426. The S&P 500 was down 6 points to close at 4,191. The Nasdaq Composite Index was down 30 points to close at 12,657. Gold was up $18 to trade at $1,977 per ounce, while oil was down $.12 to trade at $71.82 per barrel WTI.
Sorry for being so long winded on a Friday.
Have a great weekend everyone.
