Hey, today we are having lunch with the astute Morgan Housel of MF. I have been enjoying his writing for years now — he is my favorite Motley Fool writer.
Here is his very simple explanation for why the end-of-worlders have been wrong, and will continue to be wrong, for most of the future millenia (see chart above).
Housel noted what has occurred over the past 150 year or so. If you allowed the headlines to drive your investments, how would you respond to these events:
• 1.3 million Americans died while fighting nine major wars.
• Four U.S. presidents were assassinated.
• 675,000 Americans died in a single year from a flu pandemic.
• 30 separate natural disasters killed at least 400 Americans each
• 33 recessions lasted a cumulative 48 years.
• The stock market fell more than 10% from a recent high at least 97 times.
• Stocks lost a third of their value at least 12 times.
• Annual inflation exceeded 7% in 20 separate years.
• The words “economic pessimism” appeared in newspapers at least 29,000 times, according to Google.
And despite these horrific headline events, our standard of living increased 20X.
Investing is about objectively playing the odds — not about giving into emotions. This is a perfect example of how short term events can hurt your long term returns — if you allow yourself emotional reactions to them.
Why I’m an Optimist
By Morgan Housel
Motley Fool, June 4, 2013