Sir John Templeton, founder of the Templeton mutual fund family, was once asked for a quote regarding the markets. Keep in mind that this was a man from Winchester, TN who became a billionaire by pioneering the use of globally diversified mutual funds. He founded the Templeton Growth Fund in 1954, decades before our current global economy.
What quote did he offer the journalist? “The market goes up, the market goes down.” You can learn more about him at here.
Speaking of market movement, 2016 got off to the worst start in decades, for the major domestic indices, with the DJIA, S&P 500, NASDAQ Composite, and Wilshire 5000 off 10% or more. And, the rebound in the last four weeks has been, by some accounts, the best run since 1933. While the NASDAQ Composite is off 4.2% for the year, the Dow, S&P 500 and Wilshire are in positive territory year to date, as of Friday’s close.
Speaking of down years and recovery, Forbes has just released its 2016 edition of the world’s billionaires. It seems they too had a tough 2015. As of the end of 2015, the world had just 1810 billionaires, instead of the 1826 from the year before. And, their net worth is down by $570 billion, or more than 8%, to a mere $6.5 trillion.
The top 20 billionaires? They too saw their net drop 8%, to $827 billion. The top ten are common names, for those of you who track business news. Bill Gates (number one for 17 of the last 30 years), Warren Buffett, Jeff Bezos, Mark Zuckerberg, Larry Ellison, Michael Bloomberg, the Koch brothers, and then Amancio Ortega of Spain, and Carlos Slim Helu of Mexico.
The FOMC chose not to raise interest rates last week, which didn’t hurt stocks. The U.S. still has a positive nominal return on 90 day T-Bills, unlike Japan, Germany, and the ECB, all of whom you must pay to hold your cash. If you listen to government economists, it would seem that negative interest rates are designed to encourage spending, so as to spur economic growth.
There may be more to the story. As you know, plastic and electronic transactions are easy, and common for substantial parts of the world population. And each transaction is traceable. Do you have health insurance? Prove it by showing us the transaction on your bank statement. We aren’t convinced you are taking your blood pressure medicine. Show us where you are actually paying for your co-pay.
Larry Summers, a former Treasury Secretary and Harvard president, is pushing the U.S. to ban $50 and $100 bills. There is also chatter about prohibiting the €500 note. Negative interest rates have the side benefit of causing cash hoarding. Eliminating large bills makes this more challenging. The war on cash? I suspect there is an element of government control wrapped up in all this.
Rich Karlgaard, writing in the March 1, 2016 issue of Forbes, says the growth of U.S. GDP has been 2.9% annually, from 1944’s $225 billion, to the current $18 trillion. Karlgaard goes on to say that an economy growing at just one additional point per year, over that 72 years would have doubled U.S. GDP, to about $37 trillion.
So the questions. How many more billionaires would the U.S. have had? How much more opportunity for entrepreneurs? How many more jobs created and taxes paid? How much smaller would the federal deficit have been, or how much longer would Social Security have lasted? How much more would have been collected in state and local sales taxes, to support aging infrastructure? Good questions all, and worth considering. How do we facilitate economic growth? You can read the entire article here.
In 1637, you could have purchased one Semper Augustus tulip, for 6290 Dutch gilders, or all the following: 2 Dutch tons of herring, 20 gallons of French brandy, 2 hogsheads of wine, 1 ton of butter, 2 well-fed pigs, the services of an experienced carpenter for a year, a small townhouse, 1 fat ox, a ship, and 240 tons of rye.
Along the same lines, shoot us an email, and tell us about the Mississippi Fur Trading Company. You get bonus points if you can do so without an internet search.
Quotes of the week:
“Price is what you pay. Value is what you get.” – Benjamin Graham
“Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things take time: You can’t produce a baby in one month by getting nine women pregnant.” – Warren Buffett
Randy Brunson is the founding shareholder of Centurion Advisory Group. Mr. Brunson
has invested most of his thirty five year career in the area of financial services.