Who Are We Hearing From?
2022 has been the worst overall investment environment (including stocks, bonds, metals, etc.) in over 50 years. Investors have found very few places to hide. These are the investment periods that simply must be endured (I call the ‘price of admission for the long-term benefits of investing’) and perhaps where bold investors can step up and add to their holdings at lower prices.
Jeremy Grantham is a long-time investor with New England conservative roots and a skeptical view of frothy markets. He favors value stocks such as Berkshire Hathaway and Johnson & Johnson.
Alternatively, Cathie Wood of ARK is the current face of ‘new age’ companies and focuses on hot investment trends such as Tesla and Roku.
When markets are going up, Wood is often quoted and when markets fall, we hear from Grantham. This fits, though it is not necessarily helpful to investors. Their one-sided comments appear because of what has happened and not what’s coming next. It would be better if we’d hear from perspectives such as Grantham’s when time are good and Wood’s when they are not – that way we get a different view when things aren’t going as ‘planned’ and we can consider differing opinions ahead of time rather than after.
Checking in with Bitcoin
Bitcoin, the NFT (non-fungible tokens) ringleader, is experiencing a price downdraft worse than that of the stock market. Why? There are many theories, but here’s mine: Bitcoin is a speculation more than it is an investment and thus it goes up and down dramatically based on the on the ‘feel’ of the markets.
That’s okay, I suppose, if Bitcoin ‘investors’ acknowledge this reality. Instead, they argue that Bitcoin is the ‘new gold’ and believe it can serve as a counterbalance to a falling stock market. To the contrary, it has been shown again and again that it is highly correlated to the stock market and based on a half-baked idea that this ‘currency’ will be broadly accepted with time and thus will continue to go up in value (for some reason). Believers ignore that Bitcon (yes, on purpose) has many unanswered questions that may very well derail it as a worthwhile investment.
NFT’s that track actual government currency seem like reasonable investments for their convenience, but ones like Bitcoin, that are not associated with a governmental currency such as the dollar, seems ill-conceived in practice even if they ‘work’, in theory, for a period of time.
Perhaps that’s why Bitcoin is not widely accepted and stories of major losses dot the landscape, including where it’s been used as a government-backed currency (in El Salvador) where it has caused major problems.
If We Don’t Play By Same Rules….
As a former auditor, I appreciate the importance of independently verified financial statements. As auditors, we would go to organizations and independently test the veracity of their financial statements so that outside parties could rely on their accuracy. One can argue this is a major reason why the U.S. is a desirable place to invest: the reliability of the financial statements.
Sports embrace this same concept of accuracy and fairness by having referees oversee competitions to ensure fair outcomes. As long as observers trust the referees, the outcome of competitions is believed and accepted. In football, when there’s a fumble and pile-up of players, both teams instinctively signal their team has the ball even when it’s not clear. Referees objectively determine what both teams (and their supporters) subjectively want the outcome to be for their own benefit.
Unfortunately, our elections are being tested by this same concept. If we don’t have independent and fair officials overseeing elections and the results the outcome will not be broadly believed. It’s critical that those officials be objective as possible and for us, the voters (including politicians) to not influence the results to favor our preferences. If you win by cheating, you didn’t really win and the system implodes.
Immigration: Economics 101
Immigration is a political hot potato and certainly has to be managed reasonably to not overwhelm the accepting country. Poland, to its infinite credit (and likely due to its history), has welcomed millions of Ukranian refugees this year.
When it comes to immigration, Americans should keep the following in mind: 1) we need to recognize that we are a nation of immigrants and most all of us are from an immigrant background at some point 2) pro-immigration or not, practically speaking, we need immigrants to continue to thrive as a country.
Currently, there are many jobs, particularly lower-paying service jobs, which are not being filled, adding to wage inflation and worker shortages. These jobs, such as in the hospitality industry and home improvements, historically have been filled by immigrants who want to work hard to get ahead and, to get there, will accept lower wage jobs with difficult demands and hours. As a country, we need this and should welcome those willing to come here, reasonably assimilate, and do those hard jobs well, which immigrants are known for.
Americans think of ourselves as exceptional (and at times we are, such as during WWII), but doesn’t it make more sense that we are basically like everyone everywhere? Why would being born in a particular place make someone exceptional? It’s our system of government and commerce that has kept us at the top. It will only continue to if we respect it for what it is and not because of some kind of divine right as ‘chosen people’. Pride comes before the fall.
Beyond filling needed jobs, immigrants also bolster our Social Security system. As our country’s birth rate stagnates, immigrants are our best chance by far to keep social security in the black (see Europe and Japan for what can happen otherwise). Current workers support those who have retired and the math only works well if the amount of current workers stays high. America, politically and in business, is at its best when it creates an environment of opportunity and fairness and is not skewed to a few at the expense of the many. Name one society that works well over time with only a relative few benefiting.
From an investment perspective, growing and successful businesses need and will continue to need hard-working employees at all levels and it seems we can only achieve these goals if we include immigrants, a long-time source of American success.
Brian Weisman, CFA,CPA,CFP,CMA
(734)665-1454
brian@columbiaasset.com
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