“The four most expensive words in the English language are ‘This Time is Different.’”
– Sir John Templeton
Last month, we delivered our first “Great Investors” live webinar presentation. In case you missed it, please feel free to view the replay here. This month, we are reminded once again why believing that “this time is different” is hazardous to your wealth.
Save The Date For January 24
We have been publishing our “Great Investors” article series for over 10 years, and this series has consistently been our most popular content every year. We thank our loyal readers and truly appreciate your comments and feedback over the years.
One suggestion we have received several times is that many of our readers feel it would be more beneficial to have an interactive conversation about our investing philosophy and outlook on current events in relation to that philosophy. Many have suggested that it would be valuable to have an opportunity to ask questions about our topics in addition to just reading our article.
So, we have changed the format for our “Great Investors” series from a monthly written commentary to a quarterly webinar format. We will deliver a brief talk summarizing our outlook on current events in the same style you have come to appreciate in our monthly article series. We will then have ample time for Q&A and discussion in order to address any additional questions you may have.
Our next webinar will be held on Wednesday, January 24th, and will be available via online live stream and in person for those who can attend. Please save the date, and more details will be available soon!
50 Years Ago This Month
It is no secret that the geopolitical events of today are quite unsettling and uncertain, to say the least. Among other concerns, the evening news is filled with coverage of the war in Ukraine, the deeply disturbing attack on Israel, and the likely fallout from that attack, as well as continued political division and uncertainty here in the United States. During times like these, it is easy to believe that “This Time is Different” and that these challenges are unprecedented and may possibly foreshadow even bigger disasters to come.
However, as recounted in a recent article by author Nick Murray, this month marks the 50th anniversary of the month that could possibly be considered the very worst in American History. Consider the events of October 1973:
October 6:
On Yom Kippur, the most sacred day in the Jewish calendar, a coalition of Arab states led by Egypt and Syria — massively supplied and supported by the Soviet Union — launched a war of extermination against Israel. Within days, it clearly became a proxy war between the U.S. and the Soviets — the two thermonuclear powers capable of wiping out humanity.
October 10:
As the Watergate matter came closer and closer to the Oval Office, on this day, the Vice President of the United States walked into a federal courthouse in Baltimore, pleaded no contest to one felony count of federal income tax evasion, and resigned his office.
October 19:
Responding to America’s virtually unlimited resupply of Israeli forces, Arab members of the Organization of Petroleum Exporting Companies embargoed the sale of oil to the United States. Americans were forced to endure long lines at the gas pump while prices rocketed higher. By the time the embargo was lifted in March 1974, the price of oil had quadrupled. Energy-based consumer inflation exploded.
October 20:
Under subpoena for the tapes of his meetings with aides regarding Watergate, President Nixon ordered Attorney General Richardson to fire Watergate Special Prosecutor Archibald Cox; Richardson declined to do so and resigned. The order was then given to the Assistant Attorney General, who also declined to carry it out and was summarily fired. Solicitor General Bork finally executed the order, but the event set off a nationwide firestorm of rage. America’s most serious constitutional crisis since the Civil War now completely engulfed the country; it would not end until 10 more months of constantly deepening horror had passed.
October 25:
America awoke to find that during the previous night, the U.S. military and its nuclear force had been placed on a global alert (DEFCON 3). It turned out to have been a well-placed warning to the Soviets not to escalate any further in the Middle East. But that morning, no one in America knew this or seemed disposed to believe it. We turned on our televisions, half expecting to see tanks in the streets of Washington, DC.
And then, of course, everything got much, much worse. Even at the end of this month of unprecedented shocks, the S&P 500 at 108 was only down 10% from its peak of the previous January. Then — as the economy, stunned by the oil shock, fell into a 16-month-long recession — the stock market began declining in earnest. It would not bottom for another year until, on October 4, 1974, the S&P 500 reached its nadir of 62. That was down 48% peak to trough — far and away the steepest decline since the end of WWII, to a level that would never be seen again.
If you’d started with $20,000 at the market peak in January 1973 — just before all this horror began to set in — you’d have had something like $11,000 left at the 1974 trough. But if you had then just continued to stand fast, your original $20,000 — dividends reinvested and taxes paid from another source — would be over $3,000,000 today, given the current level of the S&P 500 of just about 4,373.
Helping Those You Care About
Over the last year and a half, the faith of all long-term investors has been severely tested. As must happen every few years, we were basically required to do just one big thing: reject the idea that “this time it’s different” and hew to the belief that “this too shall pass.” We must not doubt that we’ll get many additional opportunities to practice patience and discipline in the years to come.
Successful investing, while always fundamentally simple, will never be easy. You may have a family member, colleague, or friend who perhaps did not fare as well during the 2022-23 bear market and who you feel might have benefited from the sort of advice you were receiving. Should that be the case, we would certainly appreciate your introducing us to them. We very much enjoy working with you and would welcome the opportunity to offer the same level of planning and service to people whom you care about.
You are more than welcome to bring a friend or family member to our event on January 24th or to share the recording of our discussion that night.