Many folks believe right now is a terrible time to invest. But I ask you…
How is right now worse than almost any other time since humanity began?
Sure, political strife feels like it’s out of control today. But when was it otherwise?
If you long for the good ol’ days, think about Alexander Hamilton and George Washington…
Did you see the musical Hamilton? Did you have any idea how hated he was in his time? Back then, a lot of folks assumed he and Washington wanted to establish a monarchy here.
Russia’s attack on Ukraine is approaching a full calendar year. But war is a perennial phenomenon, too…
Here in the U.S. alone, we’ve endured the Civil War, World Wars I and II, the Korean War, the Vietnam War, Desert Storm, and more. And other global conflicts have caused elevated fear and uncertainty throughout history.
Recessions still happen these days. But we’ve dealt with worse ones in the past. Crashes, panics, and depressions used to occur more regularly. And social safety nets didn’t exist.
So if you’re waiting for a crisis-free time to pull the trigger and invest, that time will be…
Never.
However, as I’ll explain today, one core investing truth transcends all of history’s problems…
In short, owning productive assets always works.
Even Karl Marx and Friedrich Engels, the authors of the Communist Manifesto, agreed with this truth. As they wrote roughly 175 years ago…
The distinguishing feature of Communism is not the abolition of property generally, but the abolition of bourgeois property.
Marx and Engels didn’t want to do away with productive assets altogether. They simply took issue with who should own which assets.
Now, this truth doesn’t mean every day is better than yesterday. Like almost everything else in life, the business world ebbs and flows.
But over the longer term, the “big picture” is good – and keeps getting better. In turn, the stock market has an inherent upward bias…
It starts with population growth. More people means more activity (which we now label as “economic” activity).
Next comes personal improvement. As we become smarter and healthier, we do more economic things.
Living standards trend up over the long term. That started when humans first used caves to shelter from the elements. And if anything, we’re accelerating this growth these days.
Assets that make this growth happen produce profits.
Earnings gains and rising gross domestic product are normal. Earnings declines and recessions are periodic exceptions.
In other words… these tough times won’t last forever.
Ultimately, I believe the next bull market will parallel the 1980s in an interesting way…
Back then, I was an analyst at investment-research company Value Line. One of my senior colleagues, Lucien Virgile, wrote a periodic column in our weekly Selection & Opinion newsletter called “Technologies of the Eighties.”
Virgile was a former engineer, so he had a lot of knowledge on these topics.
Each article featured an emerging technology that he said would change the world. And eventually, the simple passage of time proved him correct about nearly everything.
It wasn’t just science fiction coming to life, either. The new technologies drove profitability of many newer and formerly no-name companies (like those in the semiconductor industry) and major portions of the stock market.
Virgile passed away about a decade ago. But today, I try to imagine what he would write if he were still around to cover the “Technologies of the 2020s”…
He would probably discuss gene editing and personalized medicine. He would likely write a lot about clean and sustainable energy. And he would cover other topics like the newest chips, industrial automation, autonomous vehicles, and advancements in space travel.
Plus, it’s only 2023. We don’t even know what will become relevant as we approach 2030.
The simple fact is… the next batch of productive assets are starting to bubble up today.
Over time, owning these productive assets will work – just as this core truth has worked since humanity began. We just need to stop focusing on yesterday’s productive assets.
If we can do that, we’ll get through this “terrible time to invest” once again.
Good investing,
Marc Gerstein
