Monday, October 15, 2007

Owning a Piece of the American Rock

I really liked Ben Stein’s NYT column yesterday that emphasized the theme of investing in stocks for the long run. It’s wallet-fattening advice.

Essentially, you’re betting on the long run economic future of this great country. You’re buying into our dynamic system of free market capitalism. This is especially true ever since Ronald Reagan reinvigorated US capitalism with supply-side reductions in marginal tax rates, industry deregulation, free trade, and low-inflation targeting by the Fed.

Democratic threats to raise taxes are likely to nibble around the edges. This was the case in the early 1990’s under Papa Bush and Clinton. Still, nobody in their right mind wants to go back to 50 percent or 70 percent tax rates. But there will be other battles, including free trade.

It is inconceivable to me that while the rest of the world eagerly embraces American economic values of freedom and entrepreneurship, that the United States would actually turn its back on these critical core values. That's craziness. And if the Democrats try to spike up tax rates, or tariffs, they will be thrown out of office as was the case with the successful Gingrich rebellion of 1994.

Incidentally, if you had stepped up to the plate and bought stock twenty years ago, after the October 1987 Black Monday, you would’ve been blessed with fabulous returns. 12 percent a year including dividends. It’s yet one more shining example of why investing for the long run is the way to go.

So what I’m saying is that owning a piece of the American rock, via stocks, is still the safest, surest, and most profitable investment strategy out there. Free market capitalism works. Ben Stein has it exactly right.