I made my money largely from 1990 to today, about a 30 year investment career. I started investing in 1975, trading commodities in Illinois and did some other business deals, but in 1981, I went to med school and later went into the Navy to pay back the cost of medical school so my investing at that time largely consisted in cheap living and trading my time to stay out of debt. I am the cohort discussed in this video.
I followed the markets since I was a kid. My first real term paper as a kid was on Jesse Livermore. My second was on the stock market. Both required reading a book or two and trips to the library since those papers were written about 1963 or so. Al Gore is 4 years older than me and had yet to invent the internet. When I was writing my papers he was trying to get laid in the back of daddy’s car, the one with the huge fins.
I lived through the recessions of the late 50’s the 60’s the 70’s and the 80’s. I went into the Navy because the inflation of the 80’s, ate all my medical school savings, so these periods weren’t historic to me, they are my history. My Dad started a business in the 60’s and went out of business because of the recession in ’66. I remember Japan in the 80’s. Japan equity investors couldn’t make enough money it was like opening a fire hydrant of money. All the smart boys were buying Japan. Japan was invincible. I didn’t own Japan, except in the 80’s when I was in med school, I ate a lot of Ramen, plus some fried eggs. Once in a while some sushi.
In the chart presented in the video he looks at several time frames. He looks at the first 60 years. The first 60 years were a time of pensions. Investing was NOTHING like today. To invest you needed a LOT of money. Every trade cost $200. A round trip cost $400. That was the invention of stocks for the long haul. If it cost 400$ to get into and out of a trade that made $1000 there was a huge psychological barrier to making that trade. It still exists today in the form of cap gains tax. People will hold onto doggie funds just because of the $20 of cap gains that have built up over decades. They typically don’t even know what the cap gains might be because “it’s complicated” but they know they are there and it’s a barrier to doing the right thing in the face of doing the cheap thing with the least hassle. Yet everybody is a tycoon.
Things changed in 1978 when Jimmy Carter signed a bill that divorced savings and loan interest from prime. Before ’78 S&L’s were highly regulated and could charge only 2 % above prime interest. After Carter’s swipe of the pen, S&L could charge any interest the market would bear. Of course to make the interest they need the money to lend so the peeps were part of the equation. The S&L charged 6%, the peeps got paid 3%. 9%, 6%. 18%, 12%. This is called inflation. Another thing that happened is the 60’s. Boomers came of age got woke and womens got libbed. Those libbed womans went to work in the 70’s which means house hold income (money supply) increased dramatically. First thing mama wanted with the new dough was a bigger crib so housing took off. Just what the S&L needed a ready source of new credit applicants for larger loans. The result? Inflation. Housing prices sky rocketed and that’s when the myth of the investment nature of home ownership was born. Many of the silent and GI generation bought houses after the war like brownstones in Boston and NYC and saw their property values explode with the increased productivity caused by the 2 hands that had previously supported the family turning into 4 hands. That ship has sailed. There aren’t anymore hands to put to work so that boot in productivity won’t happen again, but boomer parents and grandparents took advantage to sell at a 500% profit and move to FL.
In the north, garages were constructed out of concrete block because it was cheap. Houses were constructed out of limestone and brick and wood. When I moved to FL I was amazed everyone was living in a house that up north would have been considered a garage. in terms of construction quality.
Another thing happened. Corporations wanted out from pension liabilities so the government created tax deferred vehicles by which “investors” could plow their dough into “pretax” accounts, let the money compound tax free and the government would reap decades of compounding as ordinary income tax when the geezer started unloading the dough.
John Bogel came up with the idea of low cost passive index funds in 1975 which fit this time frame of creation of DIY investing. There were other mutual funds but they were offshoots of the rip off industry where you had to pay fees to get in, fees to get out and fees to stay in, but since the pensions were shutting down it was they only game in town for most working people. A round trip was $100 to the broker, 3% to 7.5% up front to the mutual fund company, and then 1.5%/yr to maintain the account. What little money you did make, you would get to pay compounded taxes on later when you were a geezer beside the 1.5%.
Competition worked in the late 90’s and prices at brokerages started coming way down. I was day trading for about $10 a round trip in the early 2000’s and fund cost hit the skids after the 2000 crash again due to competition. Trading became easy as the internet came to be, and brokerages realized they could make far more money by cutting out the private broker and letting the tycoons (rubes with the computers) generate millions of round trips with the press of a button. Now we have AI and everybody has to trade against a machine.
The point is there really is no history to history in terms of repetition. Housing is NOT going to go up 500%. There is no second spouse yet to be leveraged. I trade ETF’s all day every day, as many times as I want in a day FOR FREE. Boomers are done. They made their nut and will now spend far less on a relative basis causing a hit on GDP. Millennial’s can’t buy boomer houses because millennial’s had their house money ripped off by the colleges. Come to OUR school for 6 years get a degree in gender studies, get drunk, get laid, get woke, get $150K in bankruptcy proof debt and screw your parents because their “nest egg” house is unmarketable to someone with$150K debt and a job and future equal to a gender study degree, post 2008 housing crash. That’ll teach them damn boomers!
When you listen to this video consider the history behind the graph. Gundlach is 60, 7 years my junior but none the less a boomer. He’s lived my shared history. Dalio is 70, 3 years my senior and he too has lived my shared history. I came to believe what these guys believe through my own independent analysis before I found their videos.
In Japan they believed in stocks for the long run. same in EU. China is not going to break out, they are going to become Japan. Russia is too alcoholic and crooked to amount to anything. I’ll put the short synopsis video first, it’s only 12 minutes and covers the bullets. The actual Gundlach interview is second.
I have no idea what future is going to unfold, but I’m 100% sure (on a risk adjusted basis) it won’t look like the past 30 years. When you look at a narrative consider the context within which that narrative occurs.