Lessons from WoodstockSubmitted by Fountain Financial Associates | Financial Advisors on September 26th, 2019
Posted by Vinton Fountain in the FFA Fall 2019 Newsletter
In August of 1969, 400,000 people traveled to a 600 acre farm in Bethel, New York to celebrate three days of love, peace and music. This iconic event became widely regarded as a pivotal moment in the music movement and the counterculture generation. Perhaps some of you attended or at least remember the pictures on television. This summer marked the 50th year anniversary of Woodstock.
I will share my perspective on our country’s prosperity since that weekend on Max Yasgur’s dairy farm in New York. Hopefully, this generation returned from the festival with a modest headache, a job and some savings. After all, love and flower power is not free. Let’s look at how this generation has prospered.
Since that rainy weekend, the rate of inflation as measured by the consumer price index has reduced our purchasing power. For example, if I purchased a van to drive to the show for $1,000 in 1960, today it would cost approximately $7,000 dollars. A $100,000 house would cost $700,000 in today’s dollars.1 This invisible reduction of purchasing power or inflation is one good reason holding cash is one of the most expensive asset options available to consumers. We tend to ignore inflation, or not experience it actively, even though the impact is a slow and quiet erosion of wealth. So, what would make sense?
If the same person bought the S&P 500 Index in 1960, their investment in our country’s largest and most widely held businesses would have increased fifty times. A $1,000 investment would be worth $50,000 today. An investment of $100,000 would be worth an astounding $5,000,000.2 Think about that for a few moments and let it sink in fully. This feat was accomplished with no thinking, no market timing, and no stock picking, just faith in our democracy surrounded by the rule of law. Now that is a cultural phenomenon worth celebrating.
This appreciation of wealth was achieved with multiple cataclysmic events typically one every five years. Each new crisis felt like a world changing event that would alter the future of the most flexible, entrepreneurial and innovative society in the history of our planet. Sir John Templeton, one of the greatest investors and human beings in the history of mankind, said the four most dangerous words in investing are “this time is different.” Of course, it is never different but it feels different.
The third and final statistic to celebrate is the power of income generation and not outliving your assets. Since 1960, the dividends from the S&P 500 Index have increased twenty eight times. So, $1,000 dollars of dividend income in 1960 is now generating $28,000 annually.3 This steady stream of increasing income has provided baby boomers needed security in their retirement years.
And still today, the dividends of the world’s best businesses pay increasing dividends to shareholders and believers. It’s not rocket science, but rather a reflection on the power of time and compounding.
Speaking of hallucinations, on August 13th, 1979 Business Week magazine published its cover story The Death of Equities. The truth is that equities do not die and the world does not end. In fact, it seems the opposite is true. Our society advances in spite of ourselves and our cynical nature. Once you commit to this reality, you may be liberated from the stress and anxiety that dominates our modern culture. Give it a try and let me hear from you.
The people on the New York dairy farm in August of 1969 celebrated freedom, love and peace among other things. Since that time, the prosperity of our country and the world has advanced exponentially. Journalism does not have the capability or a genuine interest in optimism. It is both sad and true.
In the approaching political season, try to remember and reflect on the data points in this article. Allow these facts to permeate your mind, heart and soul. Be careful, you might find a smile on your face and some needed relief from a noisy and fearful world.
I believe you will be rewarded with increased happiness and hopefully better results.