The world is a wonderful place. This quarter, in our ‘What A World’ segment, we remind you that investing in stocks is investing in human ingenuity. Oh, and forget self-driving cars (boooring)…let’s talk about self-driving flying cars.
It is somehow not intuitive to Americans that stocks are shares of companies, and that they represent direct ownership of the earnings, cash flow and net assets of businesses which they themselves patronize, in many cases daily.
People see stock prices as rootless, random and inherently unstable.
This mindset regards stocks not as ownership of businesses but as so many casino chips.
– Nick Murray from his book Around the Year with Nick Murray
Here at Concentus, we have developed a philosophy of the capital markets and economy which is largely based upon a belief that long term optimism is the only reality, and that it is not possible to make a good investor out of a pessimist. We believe firmly that an educated optimism is the only outlook that is supported by history. Examples of this are all around us, although we usually choose to ignore them or put a negative spin on them.
We don’t recommend “optimism” in some sort of Polyanna way, but as an informed respect for economic history, which demonstrates that long term optimism is the only world view that squares with the facts. Likewise, this belief is not some lazy extrapolation – like saying “This is the way it’s always been, so this is the way it will always be”, with no supporting rationale. Rather, the economic trend of progress we see continuing is an essential expression of human nature.
Our optimism is based on the instinctive impulse of all 7.5 billion humans on earth to become more: To be, to do, and to own. The spirit of capitalism combined with human ingenuity and technology are thriving all over the world. Despite government, politics, financial crises, armed conflict, natural disasters, religious strife, and terrorist atrocities. It’s the combination of our human urge to become more, together with our natural ingenuity, which has driven the incredible explosion in quality of life in the last 10,000 years. We can be comfortable investing in a future shaped by human ingenuity, because it is a resource that can never run out, and we have not even scratched the surface of what it can accomplish
“The Big Casino”
As we study the difference in historical return that equity investors have achieved, compared with the historical return achieved by investors in “safe” investments such as cash and fixed income investments, we find that stocks have produced returns which are multiples of the returns achieved with “conservative” investments. Since WWII, stocks have produced a return after inflation which is more than double that of high quality bonds. The reason for this is that equity ownership is the only way to invest in human ingenuity.
We have also noticed that, for some unknown reason, Americans cannot perceive the nature of stocks as shares of companies, which represent a direct ownership of the earnings, cash flow, and assets of businesses which they themselves patronize. They don’t view the “stock market” as a portfolio of businesses with real earnings and real dividends, but instead as part of some Big Casino. They see stocks not as ownership of businesses but as casino chips. In our quest to become great investors, let us remind ourselves that stocks are actually shares of the profits, earnings, and assets of real companies, made up of real people, with real ingenuity, creativity, and intelligence.
What a World
Once in a while, we come across a truly astounding example of how human ingenuity is changing our world in incredible ways, and like to share those examples with you in our “What a World” series. This month, please enjoy this article: Dubai to launch driverless flying cars by this summer. The Jetsons are Here!
What a world we live in, and how lucky we are to live in this country, at this moment in time. The future is indeed very bright, even though it is so fashionable not to believe it!