A few years ago, we summarized Berkshire Hathaway CEO and genius investor Warren Buffett’s most essential lessons in investing for ordinary humans which he outlined in the 2017 Berkshire Hathaway Annual Report. The gist: Buffett recommends plain vanilla S&P 500 index fund with interest compounded because he found, in a famous bet he made against five high-fee investment experts, that the index fund regularly trounced the experts.
Although he does mention how to keep your head during the inevitable transient declines in the stock market — Hold tight. Do nothing. — it can be mighty challenging to see your investments start to sink, with no end in sight, with the media prophesying DOOM from all sides.
We take comfort in this piece from Jeremy Siegel’s seminal book, Stocks for the Long Run, an essential reference for anyone wanting to understand investing. It’s the memo that brokerage firm Dean Witter issued to its clients on May 6, 1932 after stocks plummeted 85 percent from their 1929 high:
There are only two premises which are tenable as to the future. Either we are going to have chaos or else recovery. The former theory is foolish. If chaos ensues nothing will maintain value; neither bonds nor stocks nor bank deposits nor gold ill remain valuable. Real estate will be a worthless asset because titles will be insecure. No policy can be based upon this impossible contingency. Policy must therefore be predicated upon the theory of recovery. The present is not the first depression; it may be the worse, but just as surely as conditions have righted themselves in the past and have gradually adjusted to normal, so this will again recur. The only uncertainty is when it will occur...I wish to say emphatically that in a few years present prices will appear as ridiculously low as 1929 values appear fantastically high.
BUT, if the world seems like it really is going to end, as it has, periodically throughout its history, there is this from W.S. Merwin:
The night the world was going to end
when we heard those explosions not far away
and the loudspeakers telling us
about the vast fires on the backwater
consuming undisclosed remnants
and warning us over and over
to stay indoors and make no signals
you stood at the open window
the light of one candle back in the room
we put on high boots to be ready
for wherever we might have to go
and we got out the oysters and sat
at the small table feeding them
to each other first with the fork
then from our mouths to each other
until there were none and we stood up
and started to dance without music
slowly we danced around and around
in circles and after a while we hummed
when the world was about to end
all those years all those nights ago
Stretch money by paper artist Matthew Sporzynski, aka the Couturier de Cardboard, a long-time Improvised Life reader. See more of his work at Rona Represents.