Happy Thanksgiving! We usually think about giving thanks for blessings in our personal lives during Thanksgiving, but I think there are some people and situations out there in our financial lives that also need some love this time of the year. Although I am sure there are more, in the interest of brevity, here are three:
Not to sound like an old codger, but the world has changed a lot since I got my start many years ago. For instance, smartphones have been around en masse only for the past 10-12 years. Think about how much everyone’s life has been made easier because of smartphones! Since their introduction, they have become faster and more capable. Of course there are negatives – poorer interpersonal skills among them. However, they have made life easier. In developing countries, cellphones have leapfrogged land lines, which in many cases hadn’t even been put in yet. Think about the advancement in the lives of people living in underdeveloped situations when they get and can use a smartphone! It takes innovators to design and build smartphones, just as it takes innovators to design and build all of the component parts of smartphones. Also, think about the health care sector and all of the innovations that have made life easier, and hopefully will continue to make life easier over time. Think of laser and robotic surgery or new immunotherapy medications for cancer. You can get an EKG now on the spot using your smartphone. None of this would be possible without the innovators who had the vision (and of course the profit motive) to bring their ideas to fruition. Be thankful for innovators – for the most part, they make lives easier!
Now we think nothing of logging into our investment accounts and making trades online right then and there. This wasn’t always the case. Not too many years ago, you could only trade by calling your broker and telling them what you want to do, and you would pay a commission that was spelled out by SEC regulations. In the past 40 years, this has all changed, and none of what you see now in the financial markets would have been possible without the deregulation of markets, how stocks are traded, and the costs of doing trades. Index ETF’s would not have been possible without deregulation. Your ability to monitor your account on a daily or even real-time basis is due to deregulation of markets. Commissions have gone from relatively high to almost non-existent. The result has been the democritization of financial markets. Everyone plays the game in real time, even when they are away from their office and through their smartphones. Think about a different sector: airline travel. Over the last 40 years, deregulation of routes and fares have resulted in an explosion in airline travel. You could argue that the system is overloaded and that it has gone too far, but deregulation has helped to make air travel possible and affordable for a large segment of the population that wasn’t previously able to travel. Politicians and a lot of the media are currently discussing increased regulation of social media and other tech sectors. I think regulation would be the wrong way to go. It takes time – years – for markets to sort things out, but free markets do a far better job of regulating than artificial government-imposed regulations. Be thankful for deregulation!
This may seem odd to you, but old-fashioned value investors are the backbone of the stock market. You couldn’t have Index ETF’s without value investors. Why? Because value investors, and moreover those who buy and hold individual stocks, keep the management of companies in line and immediately answerable to the stockholders. Think of General Electric, whose stock has fallen like a rock since 1/1/2017. GE’s demise would not have happened without individual stock owners voting with their feet by selling their GE stock. They were telling GE management at the time that they don’t like the way the company is being managed. So, GE now has new management. GE has continued to drop since the new CEO was named, but GE is heading in a different direction that will take time but that is more likely to succeed than was previous management. If all stocks were held through index funds and not through individual stockholders, as strange as that sounds, none of this transformation of GE would have happened. Thank you to value investors and individual stockholders who are keeping management’s feet to the fire! Without you, the rest of us who own funds would be lost at sea.
Happy Thanksgiving To All!