Most of my clients in the early 1990s thought the world was ending. I had just arrived at Merrill Lynch fresh out of college, just as Bill Clinton had arrived in the White House fresh out of Arkansas. My clients thought he was a socialist, especially when his wife started talking about healthcare. America at that time was still licking its wounds from the late 1980's implosions of the stock market, S&L’s, real estate, and emerging markets. No doubt about it: the world was ending. Any reasonable person could tell that. You would have sounded like a moron in 1992 if you had been telling your friends that America’s greatest years of innovation and growth were about to begin.
Sound familiar? How many intelligent people have you heard say something positive lately? Well, the world’s greatest investor, Warren Buffett, just did in his annual letter. Notably, Mr. Buffett has accumulated his fortune thinking differently. And this is refreshingly different …
Amen of the week:
"It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history… America’s economic magic remains alive and well.
Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate… But in a single generation of, say, 25 years, that rate of growth leads to … a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.
Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.
Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.
The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve. Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)
For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”
- Warren Buffett
2015 Berkshire Hathaway Annual Report
Maybe Buffett is wrong. Maybe the future is not so bright. Regardless, I believe that we are better served investing with the eyes of an optimist. As I wrote in Fielder’s most recent investor letter, "Ironically, the best way to protect yourself against this pessimistic outlook is to adopt an optimist’s attitude. Yes, there is an assault coming upon owners of capital. Your best defense, though, is a strong offense... Aim to own the greatest quality income-producing assets you can. Wake up each day hunting for great things... The key here is to “own it” – having real equity in things you understand... Between now and then, the market price of your shares will have fluctuated – at times violently. But in the end, you’ll likely have preserved your relative wealth and buying power."
Yours in the Field,
Frank Byrd, CFA
While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.