I’ve never lived in a Gilded Age. So I wouldn’t know how to revel in its plenty. The Great Depression enveloped my time with the East Bronx, my domicile. Never went hungry, either. The New York City school system from kindergarten through college was my tough grind, but a fair venue. The Rose Bowl with pretty girls sporting yellow chrysanthemum corsages escaped my view.
The Gilded Age for me, was something you read about in history books and novels. I was a Depression baby of the thirties. Unemployment and crowded 3-room apartments enveloped us. My father had participated in the 1905 Russian Revolution. The czar’s police collared him cranking a mimeograph machine. Ben survived his jail term and then was fetched to Brooklyn by his big brother domiciled in Brooklyn.
Turn of the century, the Gilded Age was for celebrants with Rolls Royces and Gatsby spreads along the East Coast. Plenty of diamonds and pearls to go around and plenty
of poor people, too. Sosnoffs didn’t make the papers and suffered in silence. Jewels don’t come out of crackerjack boxes, just candy.
Conceptually, you want to own stocks good for the next 20 years or more. So-called blue chips like American Telephone were supposed to post earnings in double digits and bump dividends annually. Same goes for widows and orphan stocks like Exxon, even General Motors and U.S. Steel. Later, all suffered in the stop-and-go economic settings.
In securities markets life is basically unfair. There can be decades of zero returns. After the tech bubble of 2000, it took 15 years to recover equilibrium and pesetas. Basically, stocks hung overpriced at huge excesses of book value.
For decades, Czar Nicholas II was conveyed in a solid gold chariot while my father grew up on black bread and kasha. Inequality being hand-in-hand with the gilded age. I remember when our Big Board traded 3 million shares daily. Amazon, past week, traded over 150 million shares the day it reported disappointing quarterly results. It took me just a minute to liquidate my holdings. Nothing is forever, I mused, but this isn’t like the good ole days in the forties and fifties when IBM was revered as the cat’s meow. Thomas Watson was royalty (not forever.) IBM got stodgy, fell apart and needed to be saved by outsiders.
If I'm to operate for years to come, what would I like to see in the financial world? Basically, a benevolent market setting. The S&P 500 needs to sell closer to 15 times earnings than 20 times. We need a benevolent Federal Reserve Board finding it easy to help with Fed Funds around 4%. Unemployment would rest around 4% and mortgage rates hung not much higher than 6%. Employment needs to stick nearly full which will keep consumer spending high.
In other words, the world and us need to grow steadily around 4% per annum. A calm geopolitical setting is a must. It may be too much to ask for in a world rich in geopolitical turmoil. Politicians love to flex their muscles and that creates tension.
In 1972, premiums for growth stocks ranged up to 4 times the S&P 500 valuation. Recession followed in 1973-’74 ran deep and took no prisoners. Banks turned into lepers and failed. In the 2008-’09 economic swoon. Citigroup needed a reverse split to reattain some price respectability. Meanwhile, Czar Nicolas parading in his gold throne was a foolish, Gilded Age performer. He ended up dethroned by the Bolsheviks and executed. My father, at 18, showed more sense and fled Russia before World War I erupted. The chart here shows a topsy setting, at least 25% above trend.
Sadly, a Gilded Age is for dreamers like Jay Gatsby who never climbed out of his swimming pool waters. My Gilded Age in stocks embraced Syntex, Polaroid and Xerox. Throw in Fairchild Camera, too. Writing options took me to the moon in a straight trajectory. Motorola, later, got red-dogged on bad numbers and I tossed it out.
Forget about a Gilded Age shining on the stock market. Don’t ever settle for any stock you can’t model with confidence.
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