“If you could predict the future, you’d be wrong!” Michael Milken. 2007. What Mike meant by that remark was that if you were prescient and able to predict any of the dramatic stock market declines that have taken place during my career; sold all your stocks at exactly the right time before those negative financial events occurred; and did not reinvest in stocks…you’d have been wrong!
Whether you sold before the 1973-74 bear market…the 1980 recession…the 1987 stock market crash…the 1990 savings and loan crisis…the 1998 Russian crisis and Long Term Capital’s meltdown…the 2000 rupture of the Internet bubble…and the post 9/11 stock market decline. The results would be the same. Stocks are higher in all instances than they were before those past crises or “panics”, in most cases, dramatically higher. For two principal reasons, we think. The U.S. government and the Federal Reserve have taken appropriate steps to limit the impact of those past crises. As a result, it has always been better during my lifetime to invest your savings for the long term in growing American businesses rather than in fixed income securities. This is because growth oriented government programs have been inflationary and have cut your savings’ purchasing power in half roughly every fifteen or so years. To prove this to yourself, think about the cost of tuition, food, rent, gasoline and salaries, or nearly anything else except your telephone and computer, fifteen years ago, fifteen years before that and fifteen years before that. Equity investments have historically grown faster than inflation, doubling in value, on average, every nine or ten years.
Read the complete shareholder letter
Whether you sold before the 1973-74 bear market…the 1980 recession…the 1987 stock market crash…the 1990 savings and loan crisis…the 1998 Russian crisis and Long Term Capital’s meltdown…the 2000 rupture of the Internet bubble…and the post 9/11 stock market decline. The results would be the same. Stocks are higher in all instances than they were before those past crises or “panics”, in most cases, dramatically higher. For two principal reasons, we think. The U.S. government and the Federal Reserve have taken appropriate steps to limit the impact of those past crises. As a result, it has always been better during my lifetime to invest your savings for the long term in growing American businesses rather than in fixed income securities. This is because growth oriented government programs have been inflationary and have cut your savings’ purchasing power in half roughly every fifteen or so years. To prove this to yourself, think about the cost of tuition, food, rent, gasoline and salaries, or nearly anything else except your telephone and computer, fifteen years ago, fifteen years before that and fifteen years before that. Equity investments have historically grown faster than inflation, doubling in value, on average, every nine or ten years.
Read the complete shareholder letter
