Something Michael Golub is Very Thankful For
The Golub Group
Michael Golub
December 21, 2010
This time of the year I always think about the things for which I am most thankful. The following is one of those that I want to share with all of Golub Group's friends and clients. The developed world is now at the point where it must clean up the mess left over from its 35 year spending and borrowing binge. I am thankful that the recovery over the next few years will be quicker and easier than the recovery from the previous biggest bust, which occurred in the Fall of 1929 through the Summer of 1932. At that point the stock market began a five year upward trend which averaged 33% in total return per year through 1937. It occurred because a believable plan for recovery was put forth by the new President, Franklin Roosevelt, who took office in 1933. He called his plan "The New Deal".
We all know what is going on now: finger pointing and a lot of resentment from the public directed toward our financial institutions, regulators, and federal government. This was exactly the attitude of U.S. citizens during the 1930's. It got so bad that the viability of capitalism itself was questioned by many Americans, some of whom began to think of themselves as socialists. This attitude is portrayed brilliantly in a magnificent, funny, and blistering book, "Where Are All the Customer's Yachts?" written in 1940. Some have called this the best book about Wall Street that has ever been produced (I encourage all of you to buy a paperback copy from Amazon). What I am thankful for at this early stage of the recovery is that unlike the 1930's, the world today has an increasingly wealthy developing world in which millions of new consumers are being created, an incredible system for global communications, the internet, and we have at least a modicum of additional wisdom (e.g. remembrances of what trade protectionism did to us during the '30s, etc.). In addition to the above, we have an outrageously overbought bond market which is now beginning to unravel, huge liquid wealth sitting on the sidelines in both corporate and individual coffers earning practically nothing. Best of all, we have magnificent multinational blue-chip American businesses selling for roughly a 40% discount to where they have been priced on average over three decades.
If I have learned anything of value in my 45 years in this business to share with all the people I care about, it is that for the above reasons the next few years will prove to have been one of the best opportunities in history for investors to hold and/or to buy the largest, strongest, and best dividend paying blue-chip businesses.
It truly is an honor and joy for me to be able to be trusted by the very special people who are clients of Golub Group.
Happy and healthy holidays to you all.
Sincerely,
Mike
(c) The Golub Group
