At a conference here at The Ritz-Carlton in Naples, Florida, I heard an increasingly common question. An attendee asked me how anyone could feel good about investing in stocks with economic and political prospects so bleak.
I reminded him that men and women have been saying that the world is going to hell in a hand basket for, oh, the last 5,000 years or so. (As the old proverb says, the dogs bark but the caravan moves on.) It’s important to remember that so much pessimism exists today because the national media delivers a terribly skewed view of the world we live in.
As I have written in this column before, there are plenty of reasons to be bullish on equities, including low inflation, zero interest rates, rapidly developing overseas markets, cheap valuations and all-time record corporate profits.
But that’s just in the short term. There are even better reasons to be bullish longer term. Understanding this will make you a better investor.
Consider, for example, Matt Ridley’s book The Rational Optimist. Ridley, a scientist, journalist and professor at Cold Spring Harbor Laboratory in New York, points out that the world is actually improving dramatically and the pace is quickening, thanks to rising personal and economic freedom and evolving technologies, medicine and trade practices. Yes, the world is far from perfect, but it is getting better.
Peter Diamandis and Steven Kotler strike a similar note in their new book Abundance: Why the Future Will Be Much Better Than You Think. In an adaptation published in the February 13 issue of Forbes, they point out that the trend isn’t nearly as dire as many seem to believe. Quite the opposite, in fact:
“During the past century child mortality decreased by 90% while the average human life span increased by 100%. Food is cheaper and more plentiful than ever (groceries cost 13 times less today than in 1870). Poverty has declined more in the past 50 years than the previous 500. In fact, adjusted for inflation, incomes have tripled in the past 50 years. Even Americans living under the poverty line today have access to a telephone, toilet, television, running water, air-conditioning, and a car. Go back 150 years and the richest robber barons could have never dreamed of such wealth.
“Nor are these changes restricted to the developed world. In Africa today a Masai warrior on a cellphone has better mobile communications than the President of the United States did 25 years ago; if he’s on a smart phone with Google, he has access to more information than the President did just 15 years ago, with a feast of standard features: watch, stereo, camera, video camera, voice recorder, GPS tracker, video teleconferencing equipment, a vast library of books, films, games, music. Just 20 years ago these same goods and services would have cost over $1 million …
“Right now all information-based technologies are on exponential growth curves: They’re doubling in power for the same price every 12 to 24 months. This is why an $8 million supercomputer from two decades ago now sits in your pocket and costs less than $200. This same rate of change is also showing up in networks, sensors, cloud computing, 3-D printing, genetics, artificial intelligence, robotics and dozens more industries.”
Investors everywhere should familiarize themselves with these points of view. After all, you’ve heard the doomsayers (again and again). You owe it to yourself to hear the other side of the story.
Looking at broad trends and exciting new developments provides a powerful antidote to the fear generated by relentless media negativity. Plus, it gives you the knowledge and confidence necessary to capitalize on the hundreds of great investment opportunities that exist in today’s fast-moving financial markets.
The world truly is your oyster … but only if you have the optimism to see it that way.