February 8, 2019

  1. It has been written that it is never about “timing the market” but rather “time in the market.” In his annual letter to shareholders dated Feb 28, 1989, Warren Buffett wrote, “We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.” On Feb 28, 1989, the S&P 500 Index stood at 288.26. On Dec 31, 2018 it stood at 2,507, and it closed last week on Feb 1, 2019 at 2,706. This represents a nine-fold increase. The cash dividend of the S&P 500 Index for the full year in 1989 was $11.73. For the full year in 2018, it was $53.61 which was about 4 ½ times greater than it was in 1989.

    In Feb 1989, the CPI stood at 122, and 253 in Dec 2018 which was about double in that time period. The 20-year average of CPI from 1998-2017 was 2.1%.  
  2. Earlier in the week I was reading in the Wall Street Journal the return for the Dow (DJIA) in the month of Jan 2019 was 7.3%, and for the S&P 500 Index it was 8.0%. For the 12-months Jan 2018 to Jan 2019, the DJIA was -2.2% and the S&P 500 Index was -2.3%. However, the 5-year annual average return (Jan to Jan) the DJIA was 12.4% and the S&P 500 was 11.0%.
  3. The point of the above stories and data points is first to say that the best way to overcome inflation for the long-term investor is by investing in the Great Companies in the US and globally. (In contrast, the Barclays Aggregate Bond Index had a 5-year average return of 2.4%.) The second point is, in my opinion, the idiocy of so many ads – print or TV – promoting market timing. I don’t think we need to spend much time discussing which ads because that doesn’t matter so much as to the reality that they exist 24/7. Financial journalism parrots a similar message by drawing attention to the false belief that somehow trading (i.e. – “timing the market”) is the key to success – whatever that means.

    Sources: Wall Street Journal, Yahoo! Finance, Bureau of Labor Statistics. Berkshire Hathaway, JP Morgan Asset Management.