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May 7, 2020

Warren Buffett Has It Right

Spring 2020 Quarterly Newsletter

Author: Marty Moore, CFP®

 

News travels fast. That’s the world we live in now. A big event that might happen right around the corner can be known by someone halfway around the globe before it even becomes known to you. Big events happen around the world all the time, but very few big events happen to the world all at once.

 

The COVID-19 pandemic has spared hardly any speck or spot on the global map. I can think of only two other events in history that blanketed such a large part of the world: World War I and World War II. Both World Wars were bleak periods in our nation’s history. Approximately 116,000 Americans died in World War I. In addition, almost 700,000 people died from the Spanish Flu outbreak that started in 1918. As the war and flu came to an end in 1919, America suffered one of its worst recessions ever. The triple hit of war, epidemic and deep recession took its toll on the morale of the nation.

 

Then something remarkable happened. We recovered and some of the most transformative inventions in our nation’s history happened in the 1920s. These include electricity, cars, the airplane and radio. Manufacturing boomed and took millions of people from the toil of long hours and low wages on the farm to a five-day work week and good paying jobs in the factory. These inventions changed the way people lived day to day and perhaps more than any other technology before or since.

 

Then came the Depression, which was also a world event to some extent but affected mostly the United States and Europe. World War II, which began in 1939, was the most destructive conflict in history. It cost more money, damaged more property and killed more people than any other war in history. After the war there was widespread fear of another depression as our economy, which had been retooled and was producing at breakneck speed to fight the war, came to a halt.

 

Again, something remarkable happened. There was no depression. Resources that had been devoted to fight the war abroad were quickly redeployed back here at home. Consider that penicillin owes its existence to the war as does radar, jets and nuclear energy. Computer technology and the internet can trace its roots back to WWII. The civil rights movement, perhaps the most important political and social event of our lifetime, began in earnest with racial integration during the war.

 

The 1950s became known as The Golden Age of Capitalism, an economic boom that lasted all the way into the 1970s. It’s often been said that booms plant the seeds of busts. The opposite is also true. We can’t know how or when our economy will recover from the recession looming in light of COVID-19. It’s likely that we’re in for a tough economic period ahead. However, the seeds of progress have been planted. We already know about artificial intelligence, robotics, DNA sequencing, blockchain technologies and 3D printing. The technology is here and there’s more to come.

 

What may surprise us is the speed at which these technologies will bring about new applications. When life is disrupted so dramatically, as it has been with the coronavirus, we become more amenable to giving up the old ways and adapting to the new. Streaming media, electric vehicles, autonomous ride-hailing, aerial drones, digital wallets and who knows what else is on the horizon.

 

Legendary investor Warren Buffett addressed a wave of negativity about the future of America in his 2016 letter to shareholders and wrote: “For 240 years it’s been a terrible mistake to bet against America and now is not the time to start.”

 

Now too, is not the time to start.

 

 

This article was featured in our Spring 2020 Quarterly Newsletter available here:

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