It is that time of year! Prognosticators and pundits issue their forecasts for the year ahead. Wouldn’t it be nice to know what the future holds? Some forecasts are hedged and don’t really say much. Our prediction is quite specific.
For those who have visited our offices, you know that we actually do have a crystal ball. It forecasts the direction of the stock market for the coming year. It does not say how far the market will go, but it always predicts the direction.
If you knew which way the stock market was going to go, could you make money investing?
Here’s the catch: our crystal ball has only been 74% accurate. So perhaps the question should be, “If you knew which way the stock market was going to go 74% of the time, could you make money investing?”
Without further ado, here is what our crystal ball says about the direction of the stock market for the year beginning January 1: it will go up.
Long-time observers will not be surprised. The crystal ball always says the market is going up. It has never predicted a down year. And checking back over the past hundred years, according to Standard & Poor’s, it has been right 74% of the time.
We don’t know how well its track record will hold up, but we believe this presents a favorable backdrop to buy bargains, avoid stampedes in the markets, and seek to own the orchard for the fruit crop. In other words, to keep on keeping on, following our principles and plans and strategies. And remember the long haul sets its sights beyond the coming year.
It is tempting here to include a discussion of the economy, the strengths and weaknesses we perceive. We’ll leave that to people with more time on their hands. If your plans are evolving and deserve some attention in the new year, please email us or call.
Cheers to 2021, friends.
Want content like this in your inbox each week? Leave your email here.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Investing involves risks including possible loss of principal. All performance referenced is historical and is no guarantee of future results.
Any economic forecasts set forth may not develop as predicted and are subject to change.
Nearly 150 years ago, Jules Verne wrote about the colorful adventures of an ambitious globetrotter in Around the World in Eighty Days. During the American leg of his journey, the traveler Phileas Fogg is attacked when he is caught in a riot that breaks out between two competing political rallies.
The punchline of the story comes when Fogg asks one of the locals what office the opposing politicians are running for. Was it a very important position? The answer: “No, sir; justice of the peace.”
Like many of the episodes in Verne’s book, the local color is exaggerated for dramatic effect. But it still makes one thing clear: American politics have a longstanding reputation for rowdiness.
We have the good fortune to be living in relatively peaceful times. When riots and protests broke out in cities across the country over the summer, it was alarming to many of us—but not unprecedented. We have been here before, even within many of our lifetimes. Adjusted for inflation, the damage surrounding the riots reacting to George Floyd’s death was roughly similar on a per capita basis to the 1992 riots over the Rodney King incident.
Such violence is tragic. It was regrettable then, and it is regrettable now. At some point in the future it will happen again, and it will be regrettable in the future too. Do not mistake our comparisons here as explanations for or resignation to violence. We offer the comparisons to seek some perspective.
Generally, we think of ourselves as optimists. We look forward to better things for our children and grandchildren than we had for ourselves. But healthy optimists move in a real world. We can hope that we will know less unrest in the future, but it will never be gone entirely.
In six years, our nation will celebrate its 250th birthday. In two-and-a-half centuries of existence it has seen civil war, two world wars, droughts, famines, and many pandemics. Every year it sees wildfires and hurricanes far more damaging than any riot in our history. It has seen the sun set on imperialism, defeated fascism, and outlasted communism. Come what may, it’s poised to survive the next presidential term, and the next, and the next.
We look forward to 2026 and celebrating the U.S. Semiquincentennial. Our crystal ball is a little fuzzier further out, but we still think the Republic will be here in 2076 for the Tricentennial, too.
And who knows? Maybe we have a chance to provide writers from around the world more uplifting episodes to write about.
Clients, when you have any thoughts or questions, please give us a call.
Want content like this in your inbox each week? Leave your email here.
We’re not pessimists, by any stretch, so we’ll apologize now for the “gotcha” headline. But do you always get what you give? No, you don’t.
When you invest a dollar, it rarely works out such that you make only a dollar or lose only a dollar. Returns aren’t symmetrical: it’s not one dollar in, one dollar out. It could be one dollar in… and many dollars out. Or pennies. No guarantees.
Our core investing philosophy guides us toward those investments that are likely to stay robust and provide healthy returns for the long haul. However, there is room in some accounts to consider more speculative investments from time to time.
Take Silicon Valley, for example, which is full of disruptive visionaries trying to turn the auto industry upside down. Maybe they are geniuses, and maybe not so much: they could go broke in the blink of an eye. But if an upstart company can capture 3% of the new vehicle market over the next few years, the payoff may be considerable. That could be an opportunity.
As another example, some time ago we invested in a flyer—a fairly risky company at the time—because we figured we might make five times our money if it worked out, and we would only lose one time our money if it didn’t. There were no guarantees either way, but the potential reward dwarfed the potential cost.
There are examples that ought to be cautionary tales, times when the potential reward is so tiny compared to the potential cost. Consider the choice of racing across the train tracks as the arms start coming down. Potential reward? You could save five minutes. Potential cost? The whole rest of your life.
Not worth it.
We can’t know the future, and we are always dealing with uncertainty. But we can think about the possibilities and work to understand the potential outcomes. This applies to investing and life: it’s why we took that flyer, and it’s why we do the practically free things that might help us live longer, healthier, happier lives.
Do you always get what you give? No, but it’s easier to find our opportunities when we understand the consequences.
Clients, when you’d like to talk about this or anything else, please write or call.
Many businesses are weathering the pandemic by staying agile. Factories are retrofitting their equipment, computer-bound workers are getting more flexible working conditions, and food services are thinking outside the dining room.
We recently read about how one brand we love is coping with COVID-19. The company Life Is Good has been slapping their cheerful slogans on shirts and coffee mugs for more than 20 years, and they had some tough decisions to make this spring.
We had the pleasure of hearing from co-founder Bert Jacobs a few years ago. What struck us was that their flavor of optimism embraces life for its messy beauty.
After 9/11 and the Boston Marathon bombing—moments when it would’ve been easy to fall into despair—the company responded. They sent the proceeds from special themed products straight to charity. Today, they’ve transformed their production process to make space between workstations and to be able to print shirts on-demand.
Their core belief that life is good hasn’t wavered, and it’s served them well. Jacobs explains that their community is one of “rational optimists.” These are people who like to say, “Life isn’t easy, and life isn’t perfect. But life is good.”
(And for whatever it’s worth, as of early July, they report zero COVID cases among employees at Life Is Good.)
That idea has served us well, too. Life has not been easy, but here we are today. Life is good.
Clients, if you want to talk through this or anything else, call or write.