What’s the No. 1 “recession proof” investment?
It could be these I.R.S. approved payouts – including the next one for $2,307.
Oh, the humanity! Everything crashes and burns around us.
The Dow Jones industrials and the S&P 500 have each crashed to subsequently burned through 15% of their value over the past three months. Many individual securities have suffered significantly more damage.
The investment equivalent of a McLaren F1, Apple (NASDAQ: AAPL) was the most valued publicly traded company, with a market equity cap in excess of $1 trillion, mere months ago. Apple finds 35% of its equity scorched to cinders today. That’s $452 billion, to put it in dollars.
Apple’s trillion-dollar equity market cap is a distant memory, as is the No. 1 ranking.
Archnemesis Microsoft (NASDAQ: MSFT) chugged by to pass Apple in December. Microsoft’s equity market cap leads Apple’s by $75 billion as I write (even though Microsoft shares have been dinged for 13% of their value since early October).
We’re all sorry-sacks investors now. We stand along the market highway, heads askew, hangdog faced, our pocket liners pulled out to the sides to resemble rabbit ears. We hold our hands palms-up in supplication.
That’s the reporting pushed by the popular media. Most of us, thankfully, are much less pauperized than we perceive.
Those who arrived late to the market scene have suffered most. I suspect most investors, though, have been more punctual. Their investment duration is measured in years, not months.
When we measure in years, a less conflagrant story emerges.
If you have been invested in a broad-market index (like the S&P 500) for the past two years, you’re likely up 15% or more. If you have been invested in Apple for the past two years, you’re up 20%.
If we expand the vista to include five years, we find gains of 50% or more in the broad-market indexes. We find Apple shares up 86%.
Of course, it could get worse before it gets better. Perhaps it’s best to pull the Buick to the curb and kill the engine (go to cash) to avoid contributing to the carnage.
Perhaps, but perhaps not. Perhaps we should keep motoring.
The good news is that long-horizon investors nearly always recover, repair, and drive on, no matter how inclusive the pileup.
The 2007-2009 bear market lasted roughly 18 months and slashed 55% of the S&P 500’s value. But within a year after the market bottomed in March 2009, the S&P 500 powered ahead 71% from the low.
And who says that we’re destined for the extreme? The next bear market could be nothing more than a fender bender.
A nearly imperceptible market correction followed the 1957-1958 recession. The Dow 30 lost 13% of its value, but in six months it had recaptured all the lost ground. Within 18 months the Dow 30 was up 55% and trading at a new high.
We could experience another 50-car Interstate-405-style pileup, like the bear market in early 2007. We could experience a one-car frontage-road swerve like in 1957. More likely, we’ll experience something in between.
Whatever we experience, we’ll soon enough recover, if we stay the course.
U.S. GDP was $300 billion (in nominal dollars) in 1950. It’s $19.5 trillion today. The S&P 500 index was priced at 25 in 1950. It’s priced at 2,478 as I write.
We have always repaired, recovered, and moved on.
America’s top companies continue paying record Liberty Check payments. The next one happens on Feb 4.
You could collect $2,307 – or much, much more.