Investors Want Lottery Tickets

Below, we quoted Thomas Jefferson, in a 2000 newsletter to investors.  During that period stock market went down for almost 3 years after 2000. We kept buying things we understood and from 2000-2003 and Target 3 had good returns.

We wrote this in 2000:

When the stock went on sale on July 4th, 1791, a mob purred in, swarmed over by the clerks, and in less than an hour oversubscribed by 4,000 shares the $8 million stock offered to the public. Thomas Jefferson in his constant political battle against Alexander Hamilton wrote, “Ships are lying idle at the wharfs, buildings are stopped, capital with drawn from commerce, manufactures, arts & agriculture, to be employed in gambling.”* He went on to say, “The spirit of gambling, once it has seized a subject is incurable. The taylor who has made thousands in one day, tho he has lost them the next, can never be content with slow and moderate earnings of his needle.”*

Human nature doesn’t change.

Currently, we have entered into a speculative zone for the stock market.  When it reverses nobody knows.  We are confident in saying the next 5-7 years returns of the stock market will be lower, to much lower than the last 5 years.  As Warren Buffett said, “If it can’t continue it will end”.  Currently investors don’t care about earnings, dividends and the price they pay.  They just want a stock that goes up, with a story they can fantasize about, without regards of where that value comes from.  In the end, the business itself has to produce the value, the stock itself doesn’t produce anything.  If it was the stock price that produced something, there wouldn’t be any private businesses.

*“Alexander Hamilton”, by Forrest McDonald, pg. 223, W.W. Norton & Company, Inc. 500 Fifth Ave New York, NY 10110


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This blog does not constitute an offer to sell, or a recommendation of any security, this update is for informational purposes only.