Jonathan M Satovsky discusses markets 10 years after the Lehman Brothers collapse, describes how consumers’ lottery habits hurt them, and explains his emphasis on the long view when setting investing goals.
Good afternoon. This is Jonathan Satovsky of Satovsky Asset Management. September 2018 with a video blog update.
And today we want to talk about 3 things.
Lessons on Lehman, lottery tickets, and the long view.
So let’s start with Lehman brothers because 10 years ago, in September of 2008, we experienced a major financial crisis and financial markets around the world had declined significantly.
And sort of deterred people from believing in capitalism and developing good long term habits of saving and investing and taking a disciplined approach to investing.
But if you look at it, the financial markets referenced by the S&P 500 declined 55% in from January of 2008 through February of 2009.
And now if you fell asleep like Rip Van Winkle for the 10 years, you’d be up 150%.
So what it has caused people is more of a lottery impact.
In fact the behavior of the consumer population, 3 out of 10 low income families played the lottery every week.
They spend $412 dollars annually on the lottery representing over $80 billion a year in lottery tickets.
So people are trying to get rich quick.
But you know just to give you a little perspective, you know last year’s darling in Bitcoin is down 60% this year.
So be careful about getting too enamored with anything, even the S&P 500.
If you take the long view, the last decade even see that the US market has vastly outperformed all the markets around the world, the foreign markets and emerging markets.
So I was with a friend last week and he told me, John, I just want to make the most money. That’s how I’d be happy.
I said, the most money, that’s interesting.
So what does that mean?
Is that in a day, in a week, in a year, in 5 years, in 10 years?
You know, how do you measure that success?
So to sort of expand upon the lesson, I’m gonna show a little example of the Nasdaq emerging markets and a globally diversified 60% value oriented stock portfolio and 40% bonds over the last 10 years.
And you could see that as a byproduct of the growth of Nasdaq related companies, Amazon and Apple crossing the trillion dollar mark which in fact in 1982, the trillion dollars was the entire market capitalization of the entire US market.
So it’s sort of a fascinating change over the last 10 years that these several companies had such a dramatic outsize impact.
But now let’s zoom back 20 years and go from January of 1999 and look at the same 3 Nasdaq emerging markets and the globally diversified 60-40 portfolio.
And you see a different story. Emerging markets would have been the best place to sit.
So understanding someone’s risk profile and someone’s temperament is probably 90% of people’s success because you need to find a path that you understand and you can be discipline enough so you can capture the returns of the investments that you have over a lifetime.
So with that have a wonderful rest of your September and we’ll speak again next month.
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