Capítulo 1
The Unfiltered Truth About Money and Markets
You've probably seen him on CNBC, heard his name in financial circles, or stumbled across his no-holds-barred blog. Joshua Brown, known as "The Reformed Broker," has built a reputation as one of Wall Street's most refreshingly honest voices. His book isn't just another financial tome-it's a raw, unvarnished look behind the curtain of the investment world from someone who straddles both sides: the advisor managing billions and the commentator calling out the industry's nonsense. What makes this book particularly compelling is Brown's unique perspective-he's simultaneously playing the game and commentating on it, giving readers an insider's view they weren't supposed to see. The book has become required reading among financial professionals, with even BlackRock CEO Larry Fink citing Brown's insights in company meetings. Unlike most financial writers who either glorify or demonize Wall Street, Brown simply tells it like it is, making this one of the most authentic accounts of modern finance you'll ever read.
Capítulo 2
Just Own the Damn Robots
There's something deeply unsettling driving today's investment landscape that few people are discussing: fear of obsolescence. While market commentators focus on political chaos, nuclear threats, and trade wars, investors keep buying despite these concerns. Why? Because there's something even more terrifying than geopolitical instability-the fear that your skills, your job, and your economic relevance are disappearing.
Kurt Vonnegut's 1952 novel "Player Piano" eerily predicted our current reality-a world where engineers and managers have meaningful employment while everyone else performs menial tasks, treated like "helpless babies." The book even features a nostalgia-selling demagogue who capitalizes on the displaced and disgruntled-written 65 years before our recent political reality.
What we're witnessing may be the first fear-based investment bubble in American history. People aren't buying stocks out of greed but terror. Robots and automation, owned by Capital, are notching victories over Labor at an accelerating pace. The tech giants aren't just another market sector-they're lifeboats in a rising technological tide that threatens to drown traditional employment.
Market analysts debate what multiple investors should pay for tech giants, but that's asking the wrong question when people feel their livelihoods are at stake. What multiple would you pay to survive? When you're drowning, you'll pay anything for a life raft.
The disruptor's credo is ruthlessly simple: "Your profit margin is my opportunity." Your profitable small business isn't a success story-it's a market failure waiting to be corrected. A New Jersey grocery store owner, seeing Amazon's entry into groceries, stopped investing in his own business and started buying Amazon shares instead. This wasn't retirement planning-it was disruption insurance. As Amazon rose over 1000% in ten years, he didn't need his stores anymore.
For decades, we invested for retirement. Now we might be investing for survival. What price is too high for a company's stock if that company spends every waking minute trying to replace you?
The solution is brutally simple: Just own the damn robots.
In the years since this observation, technology giants have exploded in value. Alphabet, Amazon, Apple, Microsoft, Nvidia, and Tesla have all more than doubled, with Tesla and Nvidia growing eightfold. By 2023, Apple's market value equaled every company in the Russell 2000 Small Cap Index combined. The "Magnificent Seven" stocks grew to account for 28% of the S&P 500-one in four dollars invested in the US stock market.
The fear of machines replacing jobs isn't new-John Henry versus the steam hammer in 1870 is just one historical example. While technological revolutions ultimately create new careers, there's always a painful transition period where people fall through the cracks.
In November 2022, ChatGPT's release marked a watershed moment, followed by visual AI programs like DALL-E and Midjourney. These systems handle an astonishing range of tasks previously thought to require human creativity. ChatGPT reached 100 million users in just two months-an adoption rate unprecedented in technological history.
As this revolution unfolds, all investment roads led to Nvidia, which transformed from a video game graphics card maker to an AI chip leader. Their GPUs became the most in-demand tech products in 2023, causing their stock to jump 28% in a single day, adding $200 billion in market value. The stock rose from $150 to over $500 in ten months.
CEO Jensen Huang's statement captures this new reality perfectly: "AI is not going to take your job. The person who uses AI is going to take your job." The message remains clear: own the damn robots or be left behind.
Capítulo 3
When Prosperity Breaks the System
The economic experiment of pandemic stimulus worked too well, and that created an unexpected problem. The government injected $4.3 trillion in direct economic stimulus, with nearly $4 trillion hitting the economy in under 18 months. While the Treasury disbursed money to businesses and workers, the Federal Reserve slashed rates to zero and bought $120 billion in assets monthly for nearly two years.
This unprecedented liquidity led to extraordinary outcomes: record corporate profit margins, massive stock buybacks, and one of history's greatest bull market rallies. Between March 2020 and August 2021, the S&P 500 doubled from 2237 to 4479 in just 354 days-the fastest doubling since World War II. In the year after March 2020, over 95% of S&P 500 stocks had positive returns.
Americans found themselves flush with cash while their investment accounts and real estate values soared. Household debt costs shrank, and even used cars appreciated in value. By late 2021, median American household net worth reached $150.3 trillion, up 14.4% from 2020's end.
The problem? Widespread prosperity proved incompatible with the American economic system. Everyone suddenly had money, options, and freedom. People quit jobs, started businesses, moved residences, negotiated flexible arrangements, and demanded higher wages. The system, which fundamentally requires winners and losers to function, began breaking down.
The response from authorities was telling: corporations demanded workers return to offices, the IRS hired 87,000 new employees, and the Federal Reserve implemented the fastest interest rate hikes in four decades. The "War on Inflation" became the new "War on Drugs"-a pretext for restoring the pre-pandemic status quo where the wealthy had unlimited options while the working poor had none.
Over $10 trillion in wealth was wiped out to return to "normal"-a 2019 world where the rich had unlimited options, the middle class maintained the status quo, and the poor had obligations without options. The system requires putting workers back in their place, regardless of the cost.
In the pandemic's aftermath, we haven't fully returned to normal, particularly in knowledge work. Employers now negotiate two or three-day in-person workweeks with employees who previously worked five days in the office. New York City still has less than half its office workers back on any given weekday, with Friday becoming "the new Saturday."
Despite Big Finance, Big Law, and Big Tech desperately wanting everyone back in their expensive glass towers, the workplace transformation appears permanent-the genie is out of the bottle.
The irony is striking: we finally gave everyone enough money to care for themselves and their families, pay bills, save, and take career risks-and the result was labeled "Economic Armageddon." That revelation speaks volumes about our system. Let's pretend we didn't see it and move along...
Capítulo 4
The Scarcity Paradox in an Age of Abundance
The tension between scarcity and abundance defines our economic moment. On one hand, certain assets have become incredibly scarce and valuable. On the other, we're drowning in excess of almost everything else.
Consider scarcity first. Ten thousand Baby Boomers turn 65 daily until 2030, with 25% likely to live into their 90s. They desperately need stocks, not bonds, to fund 30-year retirements. Meanwhile, quality stocks are increasingly scarce-there's only one Disney, one Apple. Corporate buybacks have reduced available shares while low interest rates have increased demand for dividend-paying blue chips.
This scarcity extends beyond stocks. When Steve Ballmer bought the LA Clippers for $1.8 billion, financial commentators howled about the valuation. But they missed the point-a pro sports team in Los Angeles is the ultimate scarce resource, worth whatever someone will pay. With only 30 MLB teams, 30 NBA teams, 32 NFL teams, and 32 NHL teams, supply remains severely limited. Meanwhile, demand has exploded with Forbes counting over 735 American billionaires by 2022, with new billionaires minted every 17 hours during 2020.
Yet simultaneously, we face unprecedented abundance. Unlimited music for $9 a month. Unlimited movies for $13. Unlimited news for $0. Facebook, Twitter, Snapchat-all free. Oil costs almost nothing; natural gas supplies overflow. Portfolio management is free: "Give us a billion dollars, we'll lose money managing it for you." Online firms spend $600 to acquire customers paying $60.
The business model? "We go public or get bought out by someone with too much profit, not enough user growth." Automate everything, outsource the rest. "Let's take a product people charged for, make a worse version and give it away free!"
Even money became free. Apple could borrow limitlessly but had no idea what to do with it. Malinvestment was everywhere. When you can have anything anytime, is anything worth anything?
This paradox explains why companies like Airbnb outvalue hotel chains, Uber surpasses automakers, and WeWork could be worth more than building owners. Traditional metrics like book value fail to capture what truly matters in this environment. William Bernstein posed a profound question: "What if the cost of capital never rises again?" In a world where every idea, no matter how disruptive or unproven, can get overnight funding, the investment landscape transforms dramatically.
The charts showing value's underperformance versus growth aren't just abstract lines-they represent trillions in market cap shifting between companies. They've destroyed reputations of once-legendary investors and closed numerous funds. These trends have caused divorces among hedge fund elites as aging 1990s superstars discovered their reliable strategy of betting against highfliers while overweighting cheaper stocks no longer worked in an era of free money funding disruptive business models.
No asset manager advertises "We buy the most expensive assets and add as they rise in price"-yet this strategy would have outperformed everything else since the Great Financial Crisis. The market now prizes "users" over "customers"-a semantic distinction with enormous valuation implications.
Since writing these observations, things have changed-but not entirely. The pandemic ended the decade-long zero-interest environment, unleashing unprecedented consumer spending and inflation. The Fed responded by hiking rates from zero to over 5% between 2021-2023. While the economy showed resilience, tech stocks and startups felt the pain first. The Nasdaq fell 35%, crypto collapsed, SPACs disappeared, and IPOs vanished. Eventually, disciplined growth replaced the "anything goes" mentality, and stock prices recovered as profits rose again.
Capítulo 5
The Wolf of Wall Street Legacy
I finally saw The Wolf of Wall Street and can confirm its authenticity as someone who began in the business on Long Island during that era. Having met many guys depicted in the film while cold-calling at Duke & Company (a Stratton Oakmont spin-off), I can verify they truly were savage maniacs who appeared as Ferrari-driving gods to young newcomers. The movie's scripts were identical to those taught to every NY metro area broker in the late 1990s.
Ironically, had Belfort done Wall Street brokerage legitimately, he likely would've become a billionaire by now. Leo's Long Island accent was perfect, as was Jonah's, and Margot Robbie as Nadine was stunning. The drug scenes were both sad and hilarious.
Shockingly, the film never shows a single victim's face, instead playing these scenes for laughs while encouraging the audience to high-five with the Wolf and his crew. Many wannabe Belforts still exist today, though they're dying out as potential marks don't answer landlines anymore. The movie will undoubtedly inspire countless teenage boys to emulate Jordan, just as Oliver Stone unintentionally created Gordon Gekko as a role model for finance aspirants.
In the decade since The Wolf of Wall Street's release, Leo's portrayal has become foundational iconography for young retail traders who dominated the post-pandemic market. These images-Leo dancing, shouting into phones, addressing crowds-serve as the primary form of expression for a generation whose first introduction to the stock market came through this film.
By the time they reached their twenties during the GameStop and crypto era, Belfortism was in full bloom. You can still see its lawlessness in stories about FTX's crimes, hear it in online trading forums, and feel it when Lamborghinis cruise through Brickell, making diners wonder, "What's that guy trading?"
Ironically, the film itself was funded through fraud. Producer Red Granite Pictures received capital from Jho Low, the "Asian Gatsby" who stole $4.5 billion from Malaysia's 1MDB development fund. Low's spending spree included a $27.3 million pink diamond necklace, Manhattan condos, Beverly Hills mansions, fine art, a $250 million yacht, and gifts to celebrities including DiCaprio. When Malaysian police raided related residences, they recovered 35 bags of cash in 26 currencies, 272 Hermes handbags, and 423 watches. A film about fraud, financed by one of history's largest frauds-Jordan Belfort himself couldn't have written a better story.
Capítulo 6
American Gods: The New Financial Religion
You have questions about how markets can reach record highs while society seems to be falling apart. How can stocks break through to new heights while the country sinks to new depths?
What happened to American Exceptionalism? If we killed it, the murder weapon was disbelief. In place of the pillars that upheld everything we once valued, we're now putting our faith in something new: Technology. Systems. Data. Innovation.
Like in Neil Gaiman's novel "American Gods," old beliefs are being replaced by new ones. Throughout American history, immigrants brought their gods with them, but over generations, these Old World deities lost their influence as new American gods took hold: radio, television, automobiles, airplanes, electricity, telephones, assembly lines, the internet.
Now we're witnessing this same transfer of faith in our institutions. The FBI, Senate, House of Representatives, Electoral College, mainstream media, Federal Reserve, intelligence community, judicial branch, and even the Constitution-these "Older Gods" are fading in influence and public trust.
Our faith is being transferred to a new pantheon of technology companies. Stocks like Amazon, Apple, Alphabet, Marriott, McDonald's, Netflix, Salesforce, and Visa keep hitting all-time highs despite societal turmoil. These aren't new companies, but institutions that have earned the trust of millions. We believe in their products, their durability, their vision. We've decided that regardless of Washington's chaos, these entities will shape our future.
There's blind faith at work-a self-fulfilling prophecy as these stocks grow larger in the index funds investors increasingly worship. Vanguard has become a Mecca for money, drawing more adherents and invested dollars to these corporate giants.
There's a man preaching in the desert, telling fabulous tales and winning converts daily. His detractors question mundane matters like cash flows and valuation, but he dazzles believers with spectacles-self-driving cars, automated factories, solar roofs, reusable rockets. After such feats, who wants to talk about accounting?
Saint Steve left behind plans for his final masterwork-Apple's 12.8 million square foot circular headquarters, designed for 12,000 employees. This modern Mount Olympus appears to levitate above Cupertino, built with absurdly specific materials that defy comparison.
Everything I said in 2017 remains true but has intensified. Microsoft's stock price has risen an astonishing 468%, reaching a $2.6 trillion market cap. Netflix tripled to over $200 billion, exceeding century-old Disney. Newcomer Nvidia, worth over $1 trillion with a 1,700% share price increase, has become the linchpin of humanity's AI quest through its GPUs.
Tesla joined the S&P 500, gaining 1,260% in stock price and 1,680% in market cap since 2017. At a trillion dollars, it dwarfs all other auto manufacturers, while Elon Musk became the world's wealthiest person and acquired Twitter for $44 billion.
Apple reached a $3 trillion market cap-the most valuable company in history, worth the entire Russell 2000 index combined. It comprises half of Warren Buffett's equity portfolio and trades at a 50% premium to the S&P 500's earnings multiple. As Buffett explained, "If you're an Apple user and somebody offers you $10,000 to take away your iPhone forever, you're not going to take it."
These American Gods have outlasted presidencies and grown more dominant. Their hegemony has expanded as they've rewarded shareholders and wrapped consumers ever more tightly in their WiFi-enabled, Cloud-powered embrace. They command our respect, attention and dollars regardless of geopolitical, meteorological or societal circumstances.
Capítulo 7
The New Fear and Greed
"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope." Jesse Livermore said this 100 years ago. It's still true, but I want to modify it for what I'm seeing today.
The Fear I see now isn't just fear of losing money-it's fear of becoming a relic, of seeing peers catapult ahead of you. It's FOMO, born from the Nasdaq's 1500% return since 2009, the private market wealth creation, and overnight crypto fortunes. This is Insecurity-the fear of being left behind and looking foolish. It's why "Have Fun Staying Poor" has become an enduring meme.
Similarly, traditional Greed has morphed into Envy. Even market winners aren't satisfied with profits-they need others to feel the pain of not being right. The public victory laps seem purposely staged to provoke hostility. Tweeting about wins is a convenient way to get a thousand strangers to hate you.
Envy drives wild portfolio risks, especially when surrounded by people you have little regard for profiting from things they barely understand. The more exposure we have to others' investments, the more we see their returns as our benchmark. All perspective vanishes: "If that asshole is doing it, I can do it better."
Today's markets have become MMORPGs like World of Warcraft. Reddit boards emphasize making "those people" lose rather than "our side" winning. Livermore said nothing is new in Wall Street, but he played with dozens of men in bucket shops-today it's nuclear war with millions of nameless strangers. The wealthiest players like Chamath and Steve Cohen face daily public accosting.
While Nathan Rothschild accumulated fortunes in the 1800s, 99.99% of people were unaware of his existence. Today we get text alerts about rappers' IPO profits. With trillions accumulating in full view, Insecurity and Envy bubble up: "Why am I falling behind? Why is that son of a bitch not?"
I wrote this piece at the height of one of history's greatest speculative manias, not realizing it was already ending. Within months, the Nasdaq and S&P 500 would top out, and yesterday's financial heroes would become villains.
The SPAC Kings like Chamath Palihapitiya went from admired to scorned as Twitter transformed from their gilt-edged mirror into a haunted house they fled. Trillions in losses cascaded across crypto, NFTs, growth stocks, and startups. The recriminations came from everywhere-Congress, social media, and TV personalities scolding former darlings who had led the mass delusion.
Celebrities faced legal consequences-Shaquille O'Neal allegedly hid from process servers related to FTX, Kim Kardashian and Matt Damon endured suits and fines for promoting tokens, while Kevin O'Leary and Anthony Scaramucci apologized for their proximity to crypto's worst actors.
Despite money returned and apologies offered, nothing satisfied investors who felt wronged by the charlatanism they'd eagerly joined months earlier. As influencers quietly removed their laser-eyed avatars and regulators filed charges, millions of investors witnessed one of history's great bubbles burst.
We'll retain these lessons briefly-until we see undeserving neighbors getting astonishingly wealthy again. Then we'll forget everything and play the same game with new names and investments, driven by the same unchanging urges. Bookmark this chapter-you'll see it all happen again someday soon.
Capítulo 8
Simplicity Beats Complexity Every Time
I have one topic I'm utterly unreasonable about: simplicity beats complexity in investing. This conviction wasn't given to me-I earned it the hard way. It glows like an elven sword in the presence of contradicting evidence.
SunEdison's impending bankruptcy showcases how complexity traps even brilliant investors. Despite being headed for one of history's largest financial collapses, the company attracted elite hedge funds like Third Point, Omega Advisors, Lone Pine Capital, Point72, Citadel, and Soros Fund Management. These sophisticated investors, capable of extraordinary due diligence, were all fooled by SunEdison's labyrinthine financial engineering and $8 billion debt load.
The smartest investors are drawn to complexity because it masks opportunities from others. Unfortunately, this same attraction becomes their Achilles heel-a love of complexity for complexity's sake. Sophisticated minds gravitate toward unsolvable puzzles, and competitive instinct creates "herding" among savvy investors who should know better. Similar disasters unfolded with Ocwen Financial and Valeant Pharmaceuticals, where deliberate complexity hid fundamental problems.
Meanwhile, simple approaches quietly succeed-the S&P 500 Low Volatility Index makes record highs with companies "making cookies for a nickel and selling them for a dime." Treasury bonds and blue chips steadily advance.
Many intermediaries sell complexity as their value-add, creating barriers to entry and justifying higher fees. It gives advisors interesting topics for quarterly reviews and newsletters. This "agency problem" explains why institutions order from menus of convoluted solutions-it's what their "waiters" bring them.
I've found that improving as an investor is a reductive process-eliminating unreliable variables rather than adding bells and whistles. When researching an in-house strategy with Michael Batnick, we were amazed by how many factors we could eliminate. "Why doesn't everyone do this?" I asked. "Probably because it's not bulls**tty enough. You could never sell this to most people, it's too simple," he replied.
The simplicity path aligns with history's greatest investors who reduced their process to essential truths. Simple isn't easy or stupid-as Einstein said, "everything should be made as simple as possible, but no simpler." The challenge is mental-resisting the allure of complex solutions that make outsiders feel they "just don't get it."
In 2022, markets delivered unprecedented pain-the S&P 500 plunged 18%, the Nasdaq crashed harder, and Treasury bonds suffered their worst year in history with a 17% decline. Traditional 60/40 portfolios lost 18%, worse than even the 2008 financial crisis when bonds actually cushioned the blow. This simultaneous collapse of stocks and bonds was financially and psychologically traumatic.
Right on cue, the "60/40 is dead" articles emerged, just as they always do after portfolio declines. And into this uncertainty came "solutions"-liquid alternatives, buffer ETFs, and complex hedging strategies. This follows the same playbook we saw after 2008, when commodities sleeves, Black Swan funds, and annuities were sold as the answer.
Yet history shows the simple 60/40 portfolio has never had a negative 10-year period. The worst 10-year return was still a 19.5% gain. While alternative strategies have their place when properly understood, the trade-off is always the same-by avoiding risk now, you accept lower long-term returns.
Nick Murray asks investors: "When do you want your risk, now or later?" The real risk is running out of money in old age, not short-term volatility. As Jason Zweig's father wisely noted: "There are three ways to make a living: 1) Lie to people who want to be lied to, and you'll get rich. 2) Tell the truth to those who want the truth, and you'll make a living. 3) Tell the truth to those who want to be lied to, and you'll go broke." People want to believe they can make money without downside risk, and complexity is how this fantasy is sold.
Capítulo 9
The Rules of Surviving Market Corrections
As I write this on January 21, 2022, the Nasdaq Composite is undergoing its 66th correction since 1971-now almost 15% lower than its pre-Thanksgiving peak.
The market data shows that 37% of Nasdaq corrections turn into bear markets (20%+ drawdowns), while two-thirds remain buying opportunities. My best guess is we will cross that 20% threshold, though at 14% down already, the extra 6% won't make much difference.
This correction is bad but not yet the worst of the past decade. And many individual Nasdaq stocks have already been in their own bear markets for months. As JC Parets pointed out, the broader market of stocks actually peaked in February 2021 during the mania phase, with large caps masking the decline of smaller stocks. Now the largest names-Netflix, Amazon, Alphabet, Facebook, Apple, Nvidia-are finally "catching down" with everything else.
Historical market data shows corrections are normal. Since 1928, S&P 500 corrections of 10%+ have occurred in 63% OF ALL YEARS. Since 1950, the S&P 500 has experienced an average annual drawdown of 13.6%, with:
• A correction (10%+) once every two years
• A bear market (20%+) once every seven years
• A crash (30%+) once every twelve years
These things don't follow a set schedule, but they're entirely normal market behavior, even though they're painful to experience.
Here are my rules for surviving market corrections:
1. Shut the f*** up-Nobody wants to hear your complaints about losing stocks. Everyone's in the same boat. Don't "told you so" your friends. Just grit your teeth and get through it.
2. Comportment-Act like an adult in the face of adversity. Don't whine on social media or blame others for your decisions. Your children are watching how you handle this.
3. My psychological trick-Place absurdly low limit orders on great stocks you've always wanted to own. I did this during previous corrections and sometimes got filled at incredible prices, like Starbucks in the 60s in 2020.
4. It's not about you-Your personal regrets don't matter. In market-wide corrections, stocks become commodities as funds sell what they can to meet redemptions or margin calls.
5. Newer companies get thrashed hardest-Recently public stocks lack institutional support and long-term shareholders who believe "this always comes back."
6. You're still a forced buyer-Unless you're near retirement, you need to keep buying stocks for inflation protection. Corrections actually work in your favor by letting you buy at lower prices.
7. Find something else to focus on-Stop checking prices constantly. Log out of your brokerage app. The financial media is just guessing. Read books, pursue hobbies-anything but obsessing over the market.
8. Don't cap your upside at the bottom-Be wary of hedging products sold after losses occur. They often sacrifice too much potential upside just when you need it most.
9. Swinging to cash is crazy-Nobody can reliably time exits and entries. It's magical thinking to believe you can predict what 100 million other investors will do.
10. The basics still work-Diversification saves you in corrections. Keeping leverage low gives you flexibility. Tax-loss harvesting is productive during downturns. Rebalancing opportunistically into a correction is great.
I'm at my best as a financial writer during highly volatile markets with nasty drops in stocks. Something about that moment sends me into another gear as a communicator.
My friend Dr. Phil Pearlman taught me: "The higher the VIX, the higher the clicks." People who normally ignore financial blogs suddenly search for answers after bad market days. That's when they find sites like mine. You build your audience through what you say on the way down, so say it loud and well when the spotlight's on you.
This is my life's work. I can't save every retiree or teach every millennial about wealth building, but I can help those who choose to follow me. My mission is ensuring temporary weakness doesn't become permanent mistakes.
Meanwhile, scoundrels emerge during market volatility, mixing political rhetoric with fear to convince retirees to liquidate stocks for gold. These economic charlatans prey on those who feel left behind, selling overpriced precious metals and "safe assets" that fail as inflation hedges.
I despise these parasites who feed on investor panic. I've confronted them at their fear festivals, dismantled their lies on television, and fought them on Twitter. They're revolting creatures who frighten the uninformed into making terrible financial decisions.
That's why I cape up when the VIX rises and media noise increases. The louder these vampires shout, the more intense my writing becomes to counter it. For 15 years, every correction I've told you to endure has ultimately resolved higher. Every bear market has ended.
I'll be there during the next panic, fighting these ghouls with everything I have. You can count on me-I'm not going anywhere.
Capítulo 10
Optimism as the Only Rational Default Setting
Optimism as a default setting is not just a mindset but a strategic advantage in investing and life. As J.P. Morgan famously observed, "The man who is a bear on the future of the United States will always go broke." The story of Morgan and his pessimistic friend touring Manhattan's skyscrapers illustrates this perfectly-"Funny thing about these skyscrapers-not a single one was built by a bear!"
Count the perma-bears on the Forbes 400 or pessimists running Fortune 500 companies-you'll find none. Morgan himself completed the monumental purchase of Carnegie's steel operation for $480 million, an unimaginable sum then. Winners and people of ambition accomplish monumental things, while pessimists watch from sidelines listing reasons things won't work.
Pessimism sounds intellectually seductive, especially during frightening periods like the 1981-1982 recession with 14% unemployment and 15% inflation. Yet as Peter Lynch noted, just when everyone was convinced we were heading into the 1930s, the market rebounded with vengeance. Nobody should be "perma" anything, but if you must lean one way as a default setting, the choice is obvious.
Ten years after writing the original piece, I reflect on how risky optimism seemed back then. In 2013, just five years after the Great Financial Crisis, the market had finally surpassed its 2007 high. Media constantly warned of high valuations, potential earnings disappointments, rising interest rates, debt crises, unfavorable demographics, and political concerns.
Yet 2013 became the best year for stocks since the late 1990s-the Dow up 26.5%, S&P 500 nearly 30%, and Nasdaq soaring 38.2%. About 90% of S&P 500 stocks rose, with two-thirds gaining 20%+. Tesla emerged with Elon Musk, Netflix transformed entertainment, and BlackRock surpassed $4 trillion in AUM.
A decade later, despite all our worries then and unimaginable events since, the S&P 500 has returned over 230% (12% annually). Today we face new concerns-inflation, a contentious 2024 election, geopolitical tensions, housing market freezes, and ballooning national debt.
It's easy to list problems but harder to imagine what might go right. The bad lands with a thud while good creeps up quietly. Yet optimists are eventually proven right-not every day, but always and eventually. Even if you doubt me, invest for the future anyway. Being optimistic is difficult, but any other default setting makes little sense when investing for the long term.
