Some things stay the same through the years

By DAVID MOON, Moon Capital Management, LLC
June 23, 2013

We had a party at our house yesterday. It was my 50th birthday, but the festivities were completely unrelated. We hosted about 20 kids, ages 6 to 14, to recognize the ending of a play in which they had all performed.

The party was organized around a county fair theme, complete with a ring toss, watermelon eating contest, hot dogs and snow cones.

This was a significantly different party than my thirtieth birthday party at Hoo-Ray’s or my fortieth birthday party with a big tent, 150 guests and music from the Chillbillies.

A lot can change over ten, twenty and fifty years. And a lot can stay the same.

Last week, the City of Knoxville hosted a meeting to discuss redevelopment of the World’s Fair site. Thirty years ago this week, the city released a redevelopment plan for the World’s Fair site.

Since I turned 30, the stock market has twice declined almost 50 percent. We experienced the worst economic conditions since the Great Depression.

Yet the Dow Jones Industrial Average has also increased from 3,500 to 15,000.

This increase occurred while the US was involved in two major wars, experienced multiple domestic terrorist attacks and, according to many investors, suffered through the worst presidency since Richard Nixon. (Either Bush 43 or Obama, depending on your perspective.)

When hurricane Katrina struck in 2005, many economic pundits predicted long-lasting dire consequences as a result. The loss of the world’s business port complex in New Orleans would be devastating.

Nell Henderson wrote that the economic fallout from the storm would rank alongside the 1973 Arab oil embargo.

It didn’t.

OPEC’s decision to raise oil prices by 70 percent in 1973 is another example of how some things haven’t changed over the past 50 years. We are still concerned about the economic impact of higher oil prices.

In the past 40 years oil has increased from less than $5 a barrel to more than $96.

Nominal GDP in the US increased 1,000 percent during that period.

Political scandals such as the current ones at the IRS and NSA aren’t new. Richard Nixon used the IRS as his political tool. He also had a penchant for wire taps and eavesdropping, often on himself.

The summer I turned 10 the sitting vice president of the United States was investigated for tax fraud, bribery and extortion. He was convicted of a felony and forced to resign, else he would have become president the following summer.

John Kennedy was assassinated the day I turned five months old. Three months following the assassination the Dow reached 800 and set a new record. The index would hit 900 within another 11 months.

It would take seven years to reach 1,000. The 2,000 milestone took another 15 years to accomplish.

As I look back at a half century of life and more than a quarter century of investing, several things are obvious. Most of the events that were presumed to result in economic collapse haven’t. Every generation thinks its problems are unique, but they aren’t.

And while positive stock returns tend to congregate in bunched periods, the market has survived and thrived through all of these calamities.

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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