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Oct 29, 2026
#145 - Equity bears fail to consider this huge force.
#145 - Equity bears fail to consider this huge force.
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04:29
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Transcript
0:02
Welcome to the Goodwill Investing Podcast. My name is Eddie Goodwill, author of the Goodwill Investing Journal, and this podcast is for readers that could otherwise be busy and not have time to read the journal.
0:16
So hope this audio version helps. Issue one forty-five, titled Equity Bears Fail to Consider This Huge Force. So let's get into it.
0:29
Looking at the returns for the United States S&P 500 total return index going back forty years, the compound annual return is eleven point three percent. Eye-popping.
0:42
But if you look back just ten years, we're at fifteen and a half percent. Five years, thirteen point two percent. Three years, twenty-three point five percent. And in the last twelve months, sixteen point three percent.
0:57
Many will look at the acceleration in recent period compound returns above thirteen to fifteen percent and suggest the market is ripe for a crash, perhaps an extended downturn. Maybe it is, maybe it isn't.
1:11
In ten years, we've had many ten percent declines, at least three twenty percent declines, and one thirty-five percent decline. Despite all that, the ten-year numbers still returned fifteen point five percent.
1:25
Not saying we'll continue like that, but it's just one arrow in the quiver to help ignore the constant negativity.
1:31
Furthermore, there is one important variable that a lot of people miss in their analysis, and that is the fact that being negative on stocks priced in dollars means you are bullish on fiat currency, which longtime readers of this journal know has been a seriously losing bet.
1:50
How can you be bullish on fiat currency when the money supply chart looks like a hockey stick? In twenty twenty, before COVID, M2 money supply was sitting less than sixteen trillion dollars.
2:04
Fast-forward six years, it's almost at twenty-four trillion, an increase of eight trillion dollars of money circulating, meaning a fifty percent increase in the total money supply.
2:16
Being bullish on paper dollars with infinite supply means you believe the freight train of money printing that devalues those dollars is, for some reason, going to change direction or stop.
2:28
The US government is running deficits of six to seven percent of GDP for the foreseeable future. That negative cash flow means more borrowing to fund those expenditures or increasing the money supply.
2:42
On the surface, it obviously doesn't sound good. If it was an individual, they would quickly be broke. And if it was any other country than the US, it would be way more alarming to be sure.
2:53
But it isn't any other country. The United States is the dominant capitalistic system where the best companies and entrepreneurs in the world congregate, and where the world's capital congregates too.
3:05
Despite its flaws, it is far more reliable than capitalism by permission China or basket case Europe.
3:13
Even the most famous Warren Buffett said that the US can sustain massive debt balances because the US dollar is the global reserve currency without any close viable alternative.
3:24
Obviously, stocks can go down in the short term against various reference points like currency, gold, other equities, bonds, et cetera. But a long-term bet against US equities in general, I think, is a fallacy.
3:37
Take a look at the return of the S&P 500 since nineteen sixty, where ten thousand dollars turned into eight point five million today. That's an eight hundred and fifty X.
3:50
Meanwhile, money under the mattress is down about seventy-five to eighty percent. So there you have it. We always finish off with a quote and a question.
4:00
And the quote of today is, "Whosoever commands the seas commands the trade of the world. Whosoever commands the trade of the world commands the riches of the world," Sir Walter Raleigh. And finally, the question.
4:14
Do you think the S&P 500 will be lower, higher, or flat in the next five years? That's it for today. Hope this helps. And if you like this, please share with your friends and family.
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