Great Investors Love America

By |2018-12-20T16:24:33-05:00July 11th, 2018|Blog, Great Investors Series|

“Reagan’s power was that he was confident that whatever the problem – the economy, the Soviets, the million others – he could meet it, the American people could meet it, and our system could meet it. The people saw his confidence, it allowed them to be optimistic.”
– Peggy Noonan

In last month’s article, we discussed “Investing Like a Grownup.” This month, in honor of Independence Day, we reflect on how lucky we are to be Americans.

“Optimism” Stems from Confidence

Peggy Noonan is a wonderful writer and author, whose many accomplishments include the fact that she wrote some of Ronald Reagan’s most moving speeches. In an interview in 2015, she reflected on how often people expressed an admiration for Reagan’s unflappable optimism. To many people, Reagan’s greatest strength and power was his optimism.

Noonan responded that it was not in fact Reagan’s optimism that gave him power; it was his supreme sense of confidence in the American people, and, more importantly, in the American system that allowed him to exude this infectious sense of optimism. Reagan believed so firmly in the foundational principles of the American system, and that those principles would allow us to thrive in the face of any adversity, that he was able to remain calmly optimistic regardless of the challenges of the day.

The Power of Economic Freedom

Among all of the freedoms that we Americans celebrate this month, it is the freedom to strive for economic security and prosperity that is the greatest aim of independence. The greatness of the American system lies in the individual freedom to pursue happiness – we are free to be, to do, to own, and to rise as far as personal initiative, hard work, and thrift will carry us.

I read a fascinating article recently, which I would strongly recommend for a thoughtful take on what “Liberty” really means, and the critical importance of economic liberty.

This author articulates the belief that economic choice is the most reliable source of freedom, power, equality, and justice for the greatest number of people.  If we wish to promote social justice, the best way to do so is through our ability to provide economic freedom and power to the greatest number of people, regardless of their gender, age, race, color, religion, or sexual orientation.

As the author articulates, the massive increase in per capita income in the last 250 years has in turn:

Made masses of people bold – first the free and wealthy men, then poor men, then former slaves, then women, then gays, then handicapped, then, then, then. Make everyone free, it turned out (the experiment had never been tried before on such a scale), and you get masses and masses of people inspired and enabled to have a go. “I contain multitudes,” sang the poet of the new liberty. And he did. He and his friends had a go at steam engines and research universities and railways and public schools and electric lights and corporations and open source engineering and containerization and the internet. We became rich by giving ordinary people their economic liberty.

Indeed, although the world is far from 100 percent “socially just” today, America’s system of democratic capitalism continues to lift people out of poverty at an impressive pace, creating more economic power, equality, and freedom for more people every single day.

As reported by the Census Bureau on September 12 of this year:

  • Since 1967, the percentage of Americans earning less than $35,000 (in today’s dollars) has dropped by 8 percent of the population, while the number earning more than $100,000 has tripled.
  • Real median household income rose 3.2 percent in 2016 after a 5.2 percent jump in 2015.
  • 5 million Americans rose out of poverty in 2016.
  • There are 6 million fewer people living in poverty than there were in 2014.
History’s Greatest Prosperity Machine

As investors, we should take a moment each year on July 4th to give great thanks for the opportunity to benefit from investing in the American system of economic freedom. This system, which has given us “steam engines and research universities and railways and public schools and electric lights and corporations and open source engineering and containerization and the internet” has also yielded incredible rewards for those who have invested in the American economy.

Our nation was founded on the idea that individual economic freedom, and the right to strive and thrive, are the most powerful forces of productivity in the world. As a result, the American economy has become the greatest machine for the production of widespread prosperity that the world has ever seen.

Over the 12 months ending in March of 2018, the companies that make up the S&P 500 returned $1 trillion to shareholders, in the form of dividends and share repurchases. Let us be thankful for our share of that economic bounty.

Having a Plan

The very best investors have a disciplined approach to making portfolio decisions, and they always stick to their plan, no matter what the rest of the world is doing. They have a mature temperament during both the peaks of euphoria, as well as the depths of terror, with a healthy sense of gratitude for the opportunity to invest in the most prosperous nation in the history of the world.

No predictions. No witch doctor investment sorcery or magic investing formulas. Just hard work, patience, and discipline.

By |2018-12-20T16:24:33-05:00July 11th, 2018|Blog, Great Investors Series|

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