The Death of Equities turns 40!

September 6, 2019

The infamous Business Week’s cover essay “The Death of Equities” celebrated its 40th anniversary on August 13th. A few points I feel are key to understand given this important milestone.

Equities do not die, and the world does not end. The S&P 500 closed on August 13, 1979 at 107.42; as I write this it has closed over 3,000. The dividend in 1979 was six dollars; it is currently running at an annual rate approaching $56. Inflation is up barely 3.5 times.

U.S. real GDP in 1979 was well below $7 trillion; it is today running at about $19 trillion (in 2012 dollars). Real GDP per capita went from $31,000 to $57,500. The economy has expanded significantly

The BusinessWeek article, condensed to four words: This time is different. In point of actual (long-term) fact: this time is never different. It just looks different—as indeed it did 40 years ago.

Financial journalism’s essential approach is that it always extrapolates: “This is how things are right now; therefore this is how they’ll remain into the distant future, if not forever.” This is always wrong.

The fuel on which financial journalism has always run, and will always run, is negativity. In fact, optimism remains the only realism; it is the only worldview that squares with the facts, and with the historical record.