MarketInsight | The British are leaving
By Scott Grant
Enterprising young men have been meeting on Wall Street for the purpose of trading shares of stock in businesses since way back when George Washington was president. For decades they congregated under the shade of a Buttonwood tree on Wall Street. From the beginning, this pasquinade of capitalism attracted the best and the worst that our society has to offer. Before the Civil War, “Robber Baron” Jay Gould was already famous for swindling Commodore Cornelius Vanderbilt.
Investors and speculators alike needed information. At first, handwritten “sheets” like Charles Dow’s “The Customers Afternoon Letter” had to suffice. Dow was an early writer about finance and business and he eventually turned his “sheet” into a real newspaper, The Wall Street Journal.
In May of 1896, Dow and his partners created the Dow-Jones Industrial Average in an effort to increase circulation. That first summer, the average that would become well-known to generations of Americans hit its all-time low of $28.46 during the Panic of 1896. They called a recession a Panic in those days because folks used to get scared and run to the bank in a panic demanding their money.
From those humble beginnings, Dow’s iconic average has soared to dizzying heights despite an unceasing litany of bad news. The list of disasters and catastrophes to befall mankind in the 120 years since Dow first averaged the price of 12 stocks is mind-boggling.
Yet, despite wars, famines, droughts and depressions, the Index that measures the success of American business has risen steadily, some might say inexorably, higher. The value of stocks will continue in spite of all the bad news that the mind of mankind can imagine.
Over the years we have seen a proliferation of media outlets anxious to sell this litany of bad news to nervous investors. Where once there was a shortage of information, today we have a glut. The 24-hour news cycle is ravenous for things to talk about.
For investors, this creates a trap. Read the wrong story, react in the wrong way, pay the price. Most recently, Brexit was supposed to scare us. It did, for a day or two. Then it went away. Professional investors call this “noise.”
If you want to be a successful investor, you need to learn to ignore the noise. The formula for success is simple: buy good companies, hold them, collect your dividends and ignore the noise.
Scott A. Grant is President of Standfast Asset Management in Ponte Vedra Beach. He welcomes your comments or questions at firstname.lastname@example.org.