I’ve learned through the years that the resiliency of the American public has often been grossly underestimated. In fact, Warren Buffett, throughout his illustrious career has repeatedly said, “Don’t bet against America.” A wonderful statement, but given some of our erratic history, one needs to ask the question “why not?” The answer is relatively basic: Americans know how to adapt.
If a calamitous meteorological act of Mother Nature occurs, in most instances the residents of the affected areas take a very deep breath and begin again. They pull themselves up by the bootstraps and demonstrate good old never-say-die American spirit. Or, if viewed from a monetary standpoint, some of the greatest names in American history, from Walt Disney to Harry Truman, suffered financial hardships (including bankruptcy) only to ultimately emerge stronger and better. In other words, people definitely persevere.
That’s why I’m continually amazed when financial advisers, brokers, Wall Street, and the mainstream media always tell investors that if they can’t outperform inflation, they’re doomed. But does that fit the American psyche? Over the course of history, the placing of ones chips in stocks, gold, real estate, and even collectables has produced major gyrations, frustrations, and even ruinations, all in search of staying ahead of the illusory inflation boogeyman.
What if investors kept their hard earned cash hidden under their mattress? The first thing they would realize is that when they went to retrieve their principal, it would always be there. Consequently, their money would not be negatively affected by changes in interest rates, stock market collapses, or bank failures. As they would continue to stuff the mattress, their only concern would be higher prices. Significant, you say? Or is it? The purchase of the latest technological gadget would simply mean waiting until the new product’s “whoopla” has diminished and then eventually goes on fire sale. Whether it’s iPads, iPods, or the iPhone, over the course of time, the price of the products always become cheaper. In addition, food is always at a discount if you know how to shop correctly and if you know how to cook. And of course, government giveaways are always in vogue whether it’s cars, houses, or even cash. In spite of this, the normal reply is “but what about my lifestyle?”
If the great American acclimation is one’s ability to adapt, then investors should have absolutely no fear. Besides, there’s a lot to be said for no monthly interest payments, no creditors knocking at the door, and no worry regarding your financial principal.
An interesting concept, wouldn’t you agree? And I haven’t even discussed deflation, an analysis that will need to wait for another time.