Forget This Simple Fact and Fail as an Investor

Care for a Tide detergent pod?
Not to clean your laundry, mind you, but to clean your palate. As improbable as it may seem, Tide is on the menu.
According to a Feb. 10 Salon article titled “Why Millennials Are Making Memes About Wanting to Die,” at least a few intrepid (or imbecilic?) millennials have developed an appetite for Proctor & Gamble’s (NYSE: PG) latest stain-fighting concoction — poison never intended to be ingested.
So, what’s with the latest generation of whippersnappers? Why the affinity for self-destruction?
Deidre Olsen, the article’s author, offers an answer: “We [millennials] have a dismal economic outlook, the worst of any generation born since the Great Depression. And our culture — this kind of cynical humor epitomized in memes like eating Tide pods — is merely a reflection of our worldview.”
A sure sign of age is to reflect upon the opinions of younger generations with an eye-roll: Woe is me, life has never been so unbearable, so go the inchoate thoughts of an infantilized 20-year-old.
I can’t deny Ms. Olsen’s outlook, though I suspect far fewer millennials view the world through her black-hued lens. I can deny the logic behind her nihilism.
Unfortunately, Ms. Olsen has company in her hell-in-a-hand-basket worldview, and not just among the younger crowd. Many members of the older generations are similarly inclined to view life so dimly
No, they don’t ingest Tide detergent pods. These older pessimists adopt an investing style to match their match their worldview. Gold, commodities, and hard assets dominate their portfolios. Opinions offered by essayists and other purveyors of bubbles and market collapses guide their thoughts.

Stock Prices and the Upward Bias

But here’s the inconvenient fact for those wallowing in futility: Today is better than yesterday; tomorrow will be better than today.
Economist Julian Simon highlighted this evident fact in his 1996 book, State of Humanity. Simon asserted, correctly, that “humanity’s condition will improve in just about every material way.”
Humanity’s condition has improved in every material way since 1996: smartphones, self-driving cars, Google, Uber, Airbnb, Facebook, the Sapien heart valve, access to inexpensive quality education (Khan Academy and Udemy), the blockchain. None of these technologies existed in the 1990s.
Most everything you consumed 20 years ago that you consume today not only costs less as a percentage of your income, it’s higher quality: televisions, computers, phones, automobiles, air travel. Your food is not only higher quality, it’s of greater variety than it was 20 years ago.
The fact the world continually grows materially better is reflected in the persistent bias of the stock market. The bias is up. If reality were as dreadful as Ms. Olsen and her nihilist cohort believe, the reality would be reflected in stock prices.
The reality is stock prices trend higher over time.

Long-Term Trend: Dow 30, S&P 500, NASDAQ Composite

stock prices
Of course, we live in no Utopia. Perfection is of another world. Only the childish believe it can exist in this one. Daily stock price movements will be up, down, or sideways. But the bias is still up if patience is practiced.

Stock Prices: Research Supports Bright View

A Wharton School finance professor analyzed stock-market data collected to 1871. The data show that 9.6% was the median 30-year average annual return over the past 146 years. Similar returns are seen for 20 years. Even the 15-year period is encouraging. No loss has been recorded.
History has proven that as long as an economy is underpinned by property rights, ambition, entrepreneurial actions, and free-flowing capital, material affluence will grow. All have underpinned the United States since its inception.
Perhaps this is the reason bear markets have averaged 18 months over the past 100 years. Bull markets have averaged 97 months.
Julian Simon predicted that life will continue to improve in just about every material way. He was proven right. Simon also predicted that humans will sit around complaining about everything getting worse. He was proven right again.
I side with everything improving.
I’ve been a net-long investor over my 30-year investing career. Complain if you want, I’ll invest in the proven bias. I can’t complain.

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