In the early 19th century English fable, a young chick, Chicken Little, believes the sky is falling after an acorn hits her head. Believing the world is ending, the hysterical chick decides to tell the king and on her journey meets other animals (mostly other fowl) who join in the quest. Ultimately, a fox (Foxy Loxy) leads them to his lair, leading them to believe it is the king’s palace – and proceeds to eat them all. While the moral of the story may seem obvious, the lesson seems to have been lost over the last century. While news and information swirls on our global electronic networks, one constant hasn’t changed since the invention of the printing press in the 15th century – bad news sells. In their quest for eyeballs, powerful media executives (Foxy Loxy) and every day pundits have successfully exploited human psychology proclaiming the end is near.
While much of the bad news is true, it is useful to apply some perspective and context lest we be led astray by the distortions of modern media. In a recent op-ed, NY Times columnist Nicholas Kristof cites some very real global progress. As recently, as 1981, for example, 42 percent of the planet’s population lived in “extreme poverty” as defined by the United Nations. Today, that portion has plunged to less than 10 percent. Imagine the headline “Another 170,000 People Moved Out of Extreme Poverty Yesterday” – an actual fact. Diseases like polio, leprosy, river blindness, and others are on the decline and global efforts have turned the tide on AIDS. As recently as 1950, 27 percent of all children died by the age of 15. Today, that figure has dropped to about 4 percent. In the past 5 years, 200,000 people a day got piped water for the first time and some 650,000 went on line for the first time – each day! Of course, problems like pollution, “compassion fatigue” in the rich world, and basic human rights remain problems to be addressed in today’s world, but deep pessimism can be paralyzing – and has been – to investors across the spectrum. I remember reading Paul Ehrlich’s book in the 1970’s, “The Population Bomb” which with its Malthusian dystopian predictions, resonated with my young teenage brain. Never mind that today, many are concerned about a population bust as birth rates around the world plunge to new lows and aging societies strain social safety nets.
In our quest for ever better returns, the constant challenge for us as investors is to maintain a steady hand and realistic perspective as history unfolds before us. Pandemics, global warming, nuclear armageddon and other real concerns can create an environment of disproportionate fear and cost us real money should we allow the Chicken Little in all of us to distort our vision. Thus, along with improving underlying fundamentals, we at Clearbrook remain cautiously optimistic on the broader equity markets in the short term and unabashedly optimistic for the longer term.
Perhaps Max Ehrmann put it best in his poem, Desiderata, when he writes – “Exercise caution in your business affairs for the world is full of trickery. But let this not blind you to what virtue there is; many persons strive for high ideals, and everywhere, life is full of heroism . . .With all its sham, drudgery and broken dreams, it is still a beautiful world”.