Subject: Re: Dividends
Rather, the bigger worry is a 15 year stretch of extremely low valuation levels. Or, given where we are today, perhaps even a 15 year stretch of historically average valuation levels would be crushing to a lot of people. That's probably even harder to predict than a nasty geopolitical shock.

Jim

I remember the 1960s and the 1970s. Jim's comment above is always factored into my thinking about investing, retiring, (I have no plans to fully retire) and preparedness. I feel many people retire too early. I also feel there is a major reset coming sometime in the future (demographics, government debt sales issues, inflation and a zillion other possible unforeseen causes). Munger said we should be prepared to mark down our assets by 50%. Jim is telling us to consider the specter of long running poor market returns as seen in past eras.

In the 1970s the market went nowhere while inflation devalued the purchasing power of our money. Imagine today's stock market dropping by 30% and oscillating like a sine wave around a flat valuation for, say, ten years while inflation averages 4% per year. At the end of that period a person would be annually spending about 55% more in dollars ten years later assuming their lifestyle was unchanging. I am concerned for the folks with retirement holdings in indexes who are counting on the market to continue growing their retirement funds sufficiently to offset their retirement distributions. This kind of thinking is called extrapolation. Jim is telling us to be wary of extrapolating the future using our recent/present era of high profits and high equity valuations.

This 2004 interview with Peter Bernstein is a touchstone I read at least once every year as it helps "re-set" my mindset. https://money.cnn.com/2004/10/... Peter also wrote some excellent books: https://www.amazon.com/stores/...


On the other hand, there were those who did quite well during the 1970s. Henry Singleton did well. Warren Buffett also did well. So did John Templeton. Margin of Safety, a common aspect of those three successful investors, was built into their thinking. Of these three, Henry Singleton was a three sigma level investor at adopting different strategies ahead of other investors. Value investors should read Henry Singleton's story in the book, "Distance Force: A Memoir of Teledyne Corporation and the Man Who Created It".

Uwharrie