Stock Market Crashes During Economic Booms
The higher real GDP growth goes, the higher average annual stock market returns tend to go.
The highest growth with a down stock market came in 1941 when GDP was up double digits year over year while the S&P 500 finished the year down almost 11%. This was an instance in which investors were spooked from World War II.
Otherwise, stocks have generally seen strong returns when economic growth is so high. In seven out of the 11 years when real GDP growth was 8% or higher, the stock market was up double digits.
So it’s relatively rare for the stock market to fall concurrently with a booming economy.
In addition, Gen Z faces an uncertain path to financial progress. A combination of asset price inflation (QE and COVID stimulus packages) and generally loose monetary policy has driven the transfer of wealth from the asset-poor (young) to the asset-rich (old). A new generation of Gen Z investors are willing to take risks to counter a deck that may be stacked against them. Active investing is a natural extension of hustle culture, in which risk is embraced and failure is accepted (and even celebrated); YOLO behavior on WallStreetBets is just one example. Furthermore, Gen Z retail traders have never experienced a market contraction—the oldest of them were 10 in 2007 when the S&P began its 50 percent decline. For many, passive investing is viewed as a strategy for the already rich to *stay* rich, not for those wanting to *get* rich.
Pray that you don’t get really lucky, because if you get really lucky, you may convince yourself that you’re the next Warren Buffett, and then you’ll have your head handed to you when you’re dealing with much larger amounts later on.
Future Business Revolutions
The revolution started with the consumer internet and social media companies. The next frontier will be about using data to make business more efficient and better at targeting customers. The banks, for example, must realign themselves around the use of data and mobility or they’ll lose out to fintech. Car companies, insurers, gyms, cinemas, TV companies, the list is endless. We never thought our high streets would be so vulnerable to disruption from technology, but they were.
Brave New World VS 1984
What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions.” In 1984, Huxley added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we hate will ruin us. Huxley feared that what we love will ruin us.
What Happened To Rick Guerin ?
When Charlie and Warren had started out, there were three of them. It was Charlie, Warren, and then the third guy, Rick Guerin, and they used to make investments together. They ran separate funds, but they used to work together. In fact, even when they did the See’s deal, Rick, Charlie, and Warren had interviewed Chuck Huggins to be the CEO together. The three of them were firing questions to him together to figure out whether he was the guy.
Then Rick Guerin pretty much disappeared off the map. I’ve met Rick recently, but he disappeared off the map, so I asked Warren, are you in touch with Rick, and what happened to Rick? And Warren said, yes, he’s very much in touch with him. And he said, Charlie and I always knew that you would become incredibly wealthy. And he said, we were not in a hurry to get wealthy; we knew it would happen. He said, Rick was just as smart as us, but he was in a hurry. And so actually what happened — some of this is public — was that in the ’73, ’74 downturn, Rick was levered with margin loans. And the stock market went down almost 70% in those two years, and so he got margin calls out the yin-yang, and he sold his Berkshire stock to Warren. Warren actually said, I bought Rick’s Berkshire stock at under $40 apiece, and so Rick was forced to sell shares at … $40 apiece because he was levered.
Part of the reason it’s getting easier to start a startup is social. Society is (re)assimilating the concept. If you start one now, your parents won’t freak out the way they would have a generation ago, and knowledge about how to do it is much more widespread. But the main reason it’s easier to start a startup now is that it’s cheaper. Technology has driven down the cost of both building products and acquiring customers.
A new phone app called Lumenate claims to alter the brain’s rhythms with a smartphone’s torch, putting users into a state somewhere between psychedelic high and deep meditation – and unlike a seven-hour LSD trip, it can be disengaged in a swipe.
The Creativity Of Redbull
Economists estimated that Red Bull derived $6 billion in value from the Stratos project in the form of exposure. Critically, it’s a figure that will only increase in time. That is the unique benefit of owning a piece of history — anytime the event is discussed, Red Bull, implicitly, profits.
This is the genius of Red Bull. Despite making no tangible good, the Austrian firm has created an empire, manifested a distinct personality, and constructed a mythology the envy of the consumer packaged goods (CPG) industry.
Work From Home
I’ve long worried about how my autistic son will fare when he enters the workforce … Covid, though, has rewritten the possibilities. By normalizing remote work for everybody, the pandemic has made it easier for people who don’t adapt well to office environments to thrive. The longtime resistance to supporting remote accommodations for disabled employees evaporated when neurotypical (i.e., not autistic) people had to work from home.