Friday, July 15, 2016

Weekly Message: A homework assignment...

As you know, the Dow and the S&P have achieved fresh all time highs.     click each chart, then click again, to enlarge... DJIA ALL TIME HIGH   SPX ALL TIME HIGH Although the New York Stock Exchange Composite and the FTSE All World Indexes aren't quite there yet: NYSE NOT THERE YET FTSE ALL WORLD INDEX NOT THERE YET So then, all of those times you fretted over your portfolio --- thinking this time is different, that somehow all those years of piling that 10% into your retirement plan would be snuffed out by a bursting tech bubble, a real estate/credit disaster for the ages, a country attempting to break loose from a decades-old commercial alliance with its neighbors, etc., etc. --- were for naught. "Ah", you say, "but this time IS different! The world is so crazy right now! Things don't make sense anymore! Politics, terrorism, racial discord, automation (there go the jobs)! The world has lost its way!" I have a homework assignment for you: You are to load up Google and search "Gloomy headlines from the --- you pick the decade". There's also a bonus assignment if you need the extra credit (reminder/enlightenment): Google "Advancements of the --- you pick the decade". If after completing your homework you don't feel at least a wee bit better about the world we live in, and your portfolio's long-term prospects from here, well, my dear friend, I don't know what to tell ya. Well, actually, I can tell ya that while history to this point may indeed dispel your angst and inspire resolve, you will, alas, have many opportunities (market upsets) to test that new found resolve in the days/weeks/years to come. A client said to me yesterday that she can no longer watch her chosen network. While she sympathizes with its bent, she finds it "just too depressing". Everything, according to the content its producers choose to feature, is "so damned gloomy". I assured her that if her side wins in November, the moment the results are announced the sun will start shining on good ole Fox News. And a 4-year major storm will descend upon previously sunny MSNBC. Yeah, politics is a --- you pick the adjective --- business. Me, I'm with Matt Ridley. Here's a little something I wrote back in April:
Look left, look right, then look around… When I look left I see a mammoth power-hungry establishment that seems somehow adept at convincing a large swath of the populace that it stands equipped to better their lots by slicing mammoth power-hungry establishments down to size. Hmm When I look right I see, well, ditto! Hmm… A client told me recently that when the campaigns began revving their engines her son played her a few Trump on the stump videos and said “mom, this guy makes sense!”. Since then the son has changed his mind, Bernie Sanders—“a true champion of the people”—is his man. A complete 180 you say? I think not! “Power hungry” defines both of these gentleman (and, of course, the rest of the field). The young man, in his admirable quest to cast his best vote, exposes a lack of peripheral vision that is the side effect, the curse actually, of years of intellectual feeding through the elders, instructors and media outlets of his life, all of which who bend to the faulty—and utterly pernicious—notion that society’s thriving is a top down, planned, affair. When I look around I see what Matt Ridley sees. From his 2015 book The Evolution of Everything: To put my explanation in its boldest and most surprising form: bad news is manmade, top–down, purposed stuff, imposed on history. Good news is accidental, unplanned, emergent stuff that gradually evolves. The things that go well are largely unintended; the things that go badly are largely intended. Let me give you two lists. First: the First World War, the Russian Revolution, the Versailles Treaty, the Great Depression, the Nazi regime, the Second World War, the Chinese Revolution, the 2008 financial crisis: every single one was the result of top– down decision-making by relatively small numbers of people trying to implement deliberate plans – politicians, central bankers, revolutionaries and so on. Second: the growth of global income; the disappearance of infectious diseases; the feeding of seven billion; the clean-up of rivers and air; the reforestation of much of the rich world; the internet; the use of mobile-phone credits as banking; the use of genetic fingerprinting to convict criminals and acquit the innocent. Every single one of these was a serendipitous, unexpected phenomenon supplied by millions of people who did not intend to cause these big changes. All the interesting things are incremental, says the psephologist Sir David Butler, and very few of the major changes in the statistics of human living standards of the past fifty years were the result of government action. It is a fair bet that the twenty-first century will be dominated mostly by shocks of bad news, but will experience mostly invisible progress of good things. Incremental, inexorable, inevitable changes will bring us material and spiritual improvements that will make the lives of our grandchildren wealthier, healthier, happier, cleverer, cleaner, kinder, freer, more peaceful and more equal – almost entirely as a serendipitous by-product of cultural evolution. But the people with grand plans will cause pain and suffering along the way. Beware the grand planners!
Have a wonderful weekend! Marty P.s. If this wasn't markety enough for you, watch Tuesday's and Thursday's video commentaries.

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