Improving Investor Behavior: The bell-bottom billionaires
Take a trip with me back to You re standing in line at a gas station waiting your turn to purchase fuel at three times its cost from a limited short months ago The oil embargo coupled with runaway inflation is eating away at your paycheck That home you were thinking of purchasing Out of reach now thanks to double-digit interest rates imposed by Paul Volcker at the Federal Reserve Nixon is gone the gold standard abandoned and BusinessWeek just disclosed a piece titled The Death of Equities Not the happiest of times You strike up a conversation with the guy from the next car someone seemingly sensible beyond his years Out of nowhere he drops this bit of wisdom You know someday just two companies will be worth as much as the entire U S financial sector right now Steve Booren handout Sure thing buddy you say spinning your finger next to your head to sign crazy to your spouse in the car Anything is viable But realistic Yeah right Yet here we are In the inflation-adjusted GDP of the entire United States was trillion In the current era the combined region capitalization of Microsoft and Apple alone is about trillion Combine Nvidia and Microsoft and it s trillion In other words the total value of all goods and services produced by the United States in now equates to about of the value of just two of its top companies Admittedly this is sort of an apples to oranges comparison GDP measures output not value like field cap But that assessment while fair misses the point progress via innovation Innovation especially in instrument is cumulative and at times exponential The s were a mess After Nixon left the gold standard in inflation surged Real incomes fell as prices rose The S P peaked in shortly before being cut in half The Vietnam War Watergate and the Arab Oil Embargo all contributed to a turbulent geopolitical circumstances Lines formed at gas stations It was an era of malaise on multiple fronts But amid all this discontent the microprocessor was born Intel launched the first commercially available chip in In two young guys named Bill Gates and Paul Allen founded Microsoft The following year Steve Jobs and Steve Wozniak formed Apple in a garage Nvidia came a little later in when its founder Jensen Huang created specialized graphics processors for PC gaming In current times revenue from these three companies accounts for almost of the U S s entire economic output That s a sizeable amount but three companies do not an financial system make To further put this progress in perspective remember that the S P was at in In the current era it s about a -fold increase That s an annual enhancement rate from the day equities died according to BusinessWeek to May of That means if you d invested in something tracking the S P you d have about million currently less taxes Headlines get attention but they aren t invariably right Good ideas those that power the next decade s innovation will work quietly behind the scenes regardless of their press coverage The media feeds on urgency but investing and innovation take time and patience As an equity owner you can choose either fear or patience historically only one has been consistently profitable Those who waited patiently through the s eventually saw the tide turn The Volcker Fed broke rising inflation America gained potency independence through innovations in shale and fracking Vietnam became a key trading partner and producer Equities rebounded climbing higher than imaginable Nearly all the fears blasted on the nightly news evaporated in the rearview mirror only to be replaced by new end-of-the-world-causing events Related Articles Improving Investor Behavior Don t just own shares share ownership Improving Investor Behavior History over headlines Improving Investor Behavior Meeting Mr Sphere Being communicated in that two yet-to-be-founded companies would be worth more than the entire output of the U S business activity would have sounded like science fiction But this history offers a valuable reminder that the future is so big it s almost incomprehensible Looking ahead what could these numbers look like in even years Innovation doesn t wait for good news and as investors we must focus on owning a piece of it No timeline is ever smooth but progress is inevitable On what will you choose to focus At its core investing requires optimism and a belief in the ingenuity of mankind Setbacks will happen but progress inevitably delivers a brighter future It s feasible even probable that our grandkids will compare nowadays s GDP to the value of a company being founded in someone s garage in the modern day Don t let fear dissuade you from investing in it Steve Booren is the founder of Prosperion Financial Advisors in Greenwood Village He is the author of Blind Spots The Mental Mistakes Investors Make and Intelligent Investing Your Guide to a Growing Retirement Income He was named by Forbes as a Best-in-State Wealth Advisor and a Barron s Top Advisor by State
