We asked a few of Sir John’s family members and friends to share their perspectives on Sir John’s rule of “Buy Low, Sell High.”
One of the terribly important things to remember about Sir John’s seemingly optimistic opinion that stocks always go up in the very long run, which seems dubious to many in today’s environment, is that it was not always prompted solely by positive visions for the economy.
Sir John believed very strongly that governments always debase their currencies in the long run as human nature prompts voters in democratic nations to invariably demand more than they’re willing to pay for from government. That would seem particularly true at this moment in history when even our most pro-business CEOs who have openly detested governmental interference in business since the election of Ronald Reagan are going hat in hand to Washington. Those “stimulus” funds, plus the usual deficit spending, must be borrowed and/or printed. And when stocks become cheap enough, as they are rapidly doing, sentiment will change as investors again remember that one must be in some sort of real, as opposed to paper, asset in order to maintain purchasing power.
Then of course, our population will continue to grow and per capita productivity will likely continue to grow, thus increasing the value of our goods and services, and the resulting profits. And fear will give way to prudence, which will eventually give way to euphoria and the cycle will repeat. Perhaps for all eternity; but certainly until a majority of investors become as spiritually disciplined as Sir John was.