Change is constant, but economic fundamentals are always the same

By DAVID MOON, Moon Capital Management, LLC
May 4, 2014

May 4th is a sad day for connoisseurs of fine drama; on this day in 1971 CBS aired the final episode of Green Acres.

Green Acres does continue to serve a useful social purpose, however. It is a reminder that things seldom really change. If the only constant is change, only the tools change, not the work.

I thought about this as I walked through my house a week ago while my daughter was watching Dance Moms on Lifetime Television. It is the absolute worst excuse for entertainment I can imagine.

Except for Green Acres. And the Gong Show. And Carter Country. And the Brady Bunch Variety Hour.

Even Shakespeare wrote Two Gentlemen of Verona, which ranks right down there with Three’s Company.

There has always been horrible television, even before there was television. The Rambo movies were milk toast compared to the violence that entertained audiences in the Roman Colosseum.

It is common—and perhaps even human nature for some of us—to compare our current condition to some idyllic imaginary world that only exists in our minds, telling ourselves that things are different now and likely to get worse.

The Dow Jones Industrial Average has increased from less than 1,000 to more than 16,000 in my adult lifetime, and during this entire time I’ve known smart, well-adjusted people who are convinced the world is about to end.

Do you think a coming generation of lazy, selfish ne’er-do-wells and their declining work ethic might be our ultimate downfall? So did our parents and grandparents. My guess is that even Augustine and Mary Washington were worried that little George and his mates might never amount to anything.

Maybe the political environment will be our downfall. After all, Barack Obama could be a Muslim socialist, out to confiscate all capitalist profits. Perhaps, but I can’t imagine even him placing a government-imposed limit on my income.

Richard Nixon did, however. Twice. And he was a Quaker, or at least claimed to be.
Are you concerned that high frequency trading (HFT) might or should push individuals from the stock market? HFT has been around at least since 1900, when a couple of Wall Street firms leased private telegraph wires, allowing their traders a huge speed advantage over those relying on the more common shared lines.

Dow Jones published “The Market’s Measure,” a book that described how the fall of the Berlin Wall would result in the end of the era of large wars, resulting in lower taxes, smaller government, personal empowerment and widespread international prosperity.

The book reached shelves a couple of months before the 2000 stock market bubble burst.

Technology can change more rapidly than cyber-mortals can imagine, but that doesn’t change economic fundamentals. A business is worth the present value of the cash it generates for its owners. The railroad didn’t change that, and neither did the automobile, telegraph, telephone, television or internet.

Facades change, but foundational societal change happens slowly, over hundreds of years, not hundreds of weeks or days.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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