When I talk with both my clients and others, I often hear the longing for ‘the good old days’. As we are incrementally close to tipping the calendar page over to 2024, I thought I would briefly address this topic from the standpoint of both a general population standpoint as well as financial. Both aspects will give us perspective, and if this great country needs anything right now it needs a little bit clearer perspective.

Given we run our financial projections for households out to age 100, and good financial data started to be reported in 1926, or about 100 years ago, let’s look back 98 years and get a better grip on those good old days.

From a general USA population standpoint:

1. In 1926, the average man could expect to live 55.5 years.  The average female, 58 years[i].  In 2023, the average 65-year-old couple has an average life expectancy of 89 years, with a 20% chance that one of the surviving members will live to 95[ii].  You can measure it various way, but that’s a roughly 50% improvement.
2. In 1925, we just surpassed having electricity in the majority of homes (50.1%).  However, flush toilets were only in 1/3^rd of all homes by 1940.[iii]
3. Regarding healthcare, in the 1920’s virtually no household was covered.  Everything was pay as you go.  It’s not well known, but the Social Security Act of 1935 did not have a Medicare (health) component. The broader healthcare insurance system didn’t exist per se, with medical benefit plans only beginning to be offered by companies in the 1940’s, and that was done as a way of getting around wage price controls as World War II raged.[iv]  As of 2022, 92.1% of all American’s were covered by medical insurance for some or all the year.[v]
4. I only mention it in passing, but the now ubiquitous mobile phones, computers and overnight package delivery did not exist in 1926.

Thus, by the above core metrics, it appears to be fairly objective for me to state that we are living better and longer than we were in those good old days.

From a general financial standpoint, I think  five interesting items of note will help provide perspective;

1. In 1926 the famed comedian Groucho Marx was beginning to hit his professional stride.  Accordingly, he bought a home in Great Neck, New York for $27,000 (on Long Island, where the rich from Manhattan were moving) before departing to Hollywood in 1931.  As of September 2023, that home was listed on the market for $2.3 Million[vi].  That appreciation sounds enticingly good…but if that $27,000 had been invested in the stock of some of the biggest and best companies in America, it would have instead appreciated to $515 Million (10.1% annual compounding).  It’s true that I’m ignoring the income taxes that would have been due on some of the dividends earned, but I’m also conveniently ignoring home property taxes in Nassau Country and any property insurance, fuel costs and normal maintenance homes require.
2. Looking at time for the last 96 years is a minuscule moment in the history of mankind, but it’s the maximum one we can relate to financially given the 3-4 generations it encompasses. Over that same period of time, notwithstanding the recent surges in inflation, the Consumer Price Index has averaged 2.9%[vii] per year.
3. Though the returns are similar, let’s look at the growth in the S&P 500 for the past 50 years (since 1972).  The annual return of these companies is 10.5% per annum (p.a.)[viii]  With a current index level at 4,756 for the S&P 500, whereas it was 92 in 1972, we see the index up 51 times over a matched period of time when inflation is up 8 times (40 to an end of 2023 year estimate of 310). Lest you think I would ever cherry pick data to make a point, for the financial technician in the group, annual S&P 500 return since 1926 was 10.1% p.a[ix]., a difference statistically insignificant.
4. The RETURNS mentioned above are outstandingly consistent.  However, you would be very wise to recognize that the composition of WHICH COMPANY is leading the S&P 500 in any year is NOT consistent.  Two little known but important data points in that regard for you to absorb;
5. 9 of the 10 most valuable companies in the S&P 500 index right now did not even exist in 1970![x]
6. If you look at the history of companies that ‘make it big’ (see attached slide), you’ll see that their returns are, in fact, quite impressive going INTO the ‘Top 10’.  However, if you look at their returns SUBSEQUENT to hitting that home run, you’ll see they have very inadequate returns for the next 3 – 10 years.
7. Finally, to be complete, if we measure the price of a troy ounce of gold – say from 1980 to present, you would note its increase goes from $800 to $2,072 as of the date of my writing.  That increase is 2.6 times, or 3.97% p.a., which is in the ballpark of its 50- and 100-year averages as well.

The conclusion of the above facts, I posit, is that second to love, human ingenuity might be the second most powerful force on earth.  The improvement in our human condition is demonstrated in our living standards.  Those advances stem largely from the asset class that best captures human ingenuity, which are equities (stocks), turning that human ingenuity into enduring wealth. May your 2024 bring you both love and ingenuity.

It remains my deep and distinct honor to serve you well.

Patrick Zumbusch
Founder and CEO

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[i] “Life Expectancy In The USA: 1900 – 1998 (Demography, University of California; Berkeley)
[ii] “Life Expectancy Probabilities” (Guide To Retirement, JP Morgan, 2023)
[iii] “100 Years of Home Buying: Comparing 1920s Real Estate Listings to Today’s” (Jon Gorey, Apartment Therapy, January 27, 2020)
[iv] “The U.S. Health Care Non-System; 1908 – 2008” (George B. Moseley III, History of Medicine, AMA Journal Of Ethics, May 2008)
[v] “Health Insurance Coverage in the United States: 2022” (Katherine Keisler-Starkey, Lisa N. Bunch, and Rachel A. Lindstrom, United States Census Bureau, September 12, 2023)
[vi] “Explain Again To Me How A Single-Family Home Is An Investment” (Nick Murray Newsletter, September 2023)
[vii] Matrix Book – 2022 (Dimensional Fund Advisors)
[viii] Matrix Book – 2022 (Dimensional Fund Advisors)
[ix] Matrix Book – 2022 (Dimensional Fund Advisors)
[x] “The Truth Versus The Darkness” (Nick Murray Interactive, November 2023)