The Incredible Shrinking Stock Market
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 29 August 2018
⏱️ 32 minutes
🧾️ Download transcript
Summary
#219 How fewer publicly traded companies, less stock shares outstanding and more intangible assets have led to higher earnings growth for U.S. listed companies and ultimately stronger stock market performance. Thanks to Circle Invest for sponsoring today's episode.
For show notes and more information on this episode click here.
- [0:08] Observations on the current state of the US stock market
- [4:01] What if there’s something going on within the US market that suggests continued outperformance is coming?
- [7:23] Why the number of publicly listed companies, particularly small companies, is shrinking
- [14:52] The impact of intangible assets within small companies
- [18:21] Increased amounts of buybacks are leading to a shrinking stock market
- [20:38] Multiple factors are contributing to higher shareholder profits, yet lower wages for employees
- [26:05] What are the investment implications of low wages due to monsopony?
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show it's on money. |
| 0:04.0 | How it works, how to invest in how to live without worrying about it. |
| 0:08.0 | I'm your host David Stein. Today is episode 219. |
| 0:11.0 | It's titled The Incredible Shrinking Stock Market. |
| 0:15.0 | Last week I got an email from Fred and he shared some advice that has guided his investing for nearly 40 years. |
| 0:25.8 | It's a quote by Carvith Reed, who was a late 19th and 20th century British philosopher and |
| 0:32.4 | logician. and in his book titled Logic |
| 0:36.4 | Deductive and Inductive chapter 22 his book was written in 1920 here's the |
| 0:42.0 | phrase it is better to be vaguely right than precisely wrong. |
| 0:49.8 | Here's how I apply that phrase to my investing. First, never bet the farm. Don't put all your eggs |
| 0:58.5 | in one basket or any other idiom where we don't want our investment outcome dependent on |
| 1:09.5 | predicting the future and if we put too much in one bet or speculation that could cause us to suffer from being precisely wrong. |
| 1:27.0 | Rather than a more diversified approach would be not sure exactly what's going to happen, cover the basis, and benefit from being |
| 1:38.1 | vaguely right. We do that by observing what is happening and adjusting our allocation, our portfolio accordingly. |
| 1:52.0 | Here's some examples. Not holding any stocks at all and holding lots of gold |
| 1:59.3 | while waiting for a market crash. |
| 2:08.0 | That's an example of betting on something happening and suffering if you're precisely wrong. |
| 2:10.0 | If the stock market does well and gold falls, that's not the best way to invest. |
| 2:17.6 | What about not holding any U.S. stocks? because valuations are high. The U.S. stock market makes up 52% of the global |
| 2:28.9 | stock market. If we don't hold any stocks, we will suffer if we're precisely wrong. This would have occurred in the past |
| 2:38.2 | year. Ned Davis research points out if, as I record, there's about three more trading days left in the month of August. |
| 2:47.0 | And it's on pace, the S&P 500, to measure a U.S. large company stocks to return 17.2% over the previous 12 months compared |
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