Living in the Past

According to some studies recently cited by the Wall Street Journal, a large percentage of Americans believe that life was better for people like them in the 1960's than it is now. Contrast that with the overwhelming majority of economists who conclude that life in the U.S. today is much better. The economists point to significantly higher wages on an inflation-adjusted basis, superior technology, and health advances that have added 10 years to our life expectancy.

Why do people ignore these major improvements? The article suggests the following explanations for their affinity for the past:

  • Wages and jobs have deteriorated for certain groups, especially for those with limited education.
  • We recently experienced a large recession from which we are slowly recovering.
  • Material standards have improved, but we live in an age of increased uncertainty.
  • Some people focus more on social changes than standard of living improvements.
  • The current presidential campaign has increased anxiety.

We should also consider that maybe people place too much emphasis on the present and idolize the past. We tend to focus on the difficulties we may be experiencing today and discount (forget) those that occurred a long time ago.

My family sat glued to the news on television with Huntley & Brinkley every night at dinner in the '60s. This was not a time of peace, love and understanding as far as I can remember. The Vietnam War and the Civil Rights struggle are but two examples. As for elections, the 1968 Democratic Convention in Chicago was quite a (bloody) scene.

As I noted in my last newsletter, pessimism has its appeal. But every generation has its challenges. A more nuanced look at today and the past may lead to a different perception of both.

Words of Wisdom

The past is always a rebuke to the present. -- Robert Penn Warren

Let's go Living in the Past -- Jethro Tull (1969)

The Attraction of Pessimism


"The sky is falling" seems to have an innate appeal, especially when it comes to investing. Listen to hear why pessimism appears so attractive and optimism naive.

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Is the Middle Class Disappearing?

The claim that the middle class in America has been losing ground provides much of the heated rhetoric in this year's contentious election campaign. But is it true? The answer is not so simple. Without disputing the notion that many Americans are suffering economically -- and without opining on what the causes or solutions may be -- it is worthwhile to consider the matter further.

Last year, a Pew Research Center report found that slightly less than half of American households are "middle-income" as defined in the study. That's down from 61% in 1971. So the middle class appears to be shrinking. But the study shows that this occurred due to more people joining high-earning households (7% growth), whereas the share of low earners grew at a slower rate (4%).

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Oil Prices & The Stock Market


 Recently oil prices and the stock market have moved in tandem. But does it make sense that stocks should decline as the price of oil drops? Based on articles in the New Yorker, Bloomberg, and Barron's, there are reasons to believe that the answer is no. Listen to hear why. 

Impediments to Gauging How Your Investments are Performing

It's clear that the stock market has gotten off to a bad start in 2016. Maybe less apparent was how challenging 2015 was as well. And what about 1987? The stock market was up over 5% that year (including dividends), which seems decent. Yet the 20% drop on October 19, 1987 probably didn't leave investors feeling too good about their portfolio at the time.

Our perception of market performance can be clouded by certain biases. In the case of 1987, it was a major traumatic event. The precipitous decline, however, was only one day. Scary? Yes. But there was no long-term impact if you hung in there as the market made new highs less than one year later. (Of course, I was a young lawyer at the time with no real savings, just a mortgage and an eight day old son.)

The difficulties last year were easy to miss since the S&P 500 Index eked out a small gain. But the broader investment universe in 2015 fared less well. The focus on just one aspect of investments -- large U.S. stocks -- may have prevented us from seeing the bigger picture.

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