Understanding Capitalism
Capitalism: "An economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth."
Baby Stats Update: In case you felt demographics moved too slowly to be important: check this article here.
Demogronomics
We’ve said for years that Italy is struggling. Demogronomics – the economics of demographics - tell us the US, far and away, is the best situated developed economy in the world as it relates to growth in the future; driven by strong replacement level birth rates.
Simply put, the productivity of the most efficient widgets plant in the world is zero if there is no demand for widgets. And now there’s lots of demand (and growing) for most of America’s widgets.
US manufactured goods real output is back at the previous cyclical high, hampered mainly by the setbacks in energy.
And the churn we’re feeling is the market’s reaction to a far larger event that’s unfolding, and that few are paying attention to. That’s good news for those planning for the long-term.
The last time we saw this type of massive demographic and economic shift come together, it took nearly 20 years for the entire secular move to unfold.
Back to School…
Here’s a pop quiz for you. In the future do you believe that:
- people will want to continue inventing things?
- people will need to purchase "stuff" or use services?
- people will continue desiring ownership of property or investments?
- most businesses will likely continue to feel the same about the three issues noted above?
If you answered yes to these questions then you’ve passed the test. You now understand capitalism.
If, however, you did not answer those questions with a “Yes,” do not be alarmed. You are not alone. But don’t invest in the stock market. It’ll be too volatile and likely won’t mesh with your emotions, which will lead to costly errors over time.
Time and Money
To be an investor you have to work with large swathes of time, cease being controlled by your emotions, and recognise that investing will at times be a very, very ugly game.
Think of stocks, markets, equities just like life itself; there will always be someone prettier, slimmer, with better abs, more money, a nicer car or a bigger house…and showing a better return in the last 85.7 hours. Always.
A Dirty Little (Investment) Secret
Rest assured that at some, or maybe even two or three times in your life, about 50% of your account will vanish (temporarily). And as long as you don't react to that event poorly it will tend to find its way back if you.
“Capitalism works better than it sounds, while socialism sounds better than it works.“
—Richard M. Nixon, Beyond Peace (1994)
So, don’t let your emotions control your reactions.
And remember that there’s no pile of dead bodies beneath roller coasters because people don’t jump off during the scariest parts of the ride.