AIs and EVs - What 120 Years of Stock Market History Tells Us To Do - BTI Weekly
Jul 31, 2023 12:01 am
This Week in Stock Market History
“Why are memories so short? Why do such speculative crazes seem so isolated from the lessons of history? I have no apt answer to offer, but I am convinced that Bernard Baruch was correct in suggesting that a study of these events can help equip investors for survival.”
― Burton Malkiel, author A Random Walk Down Wall Street
This week in 1903, Ford Motor Company sold its first ever car - a Model A for $850 ($29,000 in today's dollars).
The car was a hit, and would lead to more than $37,000 ($1.2 million today) in profits for Ford that year.
Lesson from History:
For any investor today owning EV stocks, a review of the birth of the US auto industry and particularly its history with investors, is a must read.
With hindsight of course, Ford's company seems like it was destined for success. But that was hardly the case.
This sale of the first Model A reportedly came when Ford was down to just $200 in the bank. By late July 1903, Ford was perhaps just weeks away from seeing his third failure in the auto manufacturing business in 3 years.
What you may not know is that Ford Motor Company was Henry Ford's third attempt at a car company. The Detroit Automobile Company (which was shut in 1901), and the Henry Ford Company (which Henry Ford left in 1902) had both left investors with tens of millions of dollars in losses in today's dollars by 1902.
Ford was hardly the only one trying to build a business around the promising prospects of the automobile. While the car would change the world as we know it, more than 1,600 automotive companies would go bankrupt trying to compete in the space.
Remind you of today's EV market? With hundreds of EV companies already around, and new ones sprouting up every day, it may be tempting to jump on the bandwagon in a hope to strike it rich.
But if history is any guide, most of these investments will go the way of the Detroit Automobile Company. Invest accordingly.
This week in 2016 saw the final end to one of the darlings of the dot-com bubble, Yahoo.
Yahoo reached a valuation of over $125 billion at the tech bubble peak before seeing its share price crash back to earth by 2001.
Verizon would incorporate the assets of Yahoo with the assets from its purchase of AOL (which it purchased for $4.4 billion in 2015) into a new division called "Oath".
By the end of 2018, Verizon would write down the value of its assets in Oath to just $200 million, effectively admitting the assets of Yahoo were just about worthless.
Lesson from History:
This week we were reminded of the excitement of investing in the early 1900s and early 2000s. But that excitement turned to ruin for many investors. Why is that?
The internet changed the word, the automobile changed the world.
But Yahoo did not, and neither did the Detroit Automobile Company.
How do you invest in these uncertain times? History tells us that keeping broad exposure to the stock market will outperform most individual investors wagering heavily on these individual names making headlines today.
Even if you want to focus on investing in tech, there's so many great options that don't entail risking your future on an individual company.
QQQ is an ETF that follows the NASDAQ -100 index. Microsoft, NVIDIA, and Google make up its top holdings. Want to invest in the future of AI, here's a great choice that will let you capitalize on the rise of AI without risking the house.
DRIV is an ETF by Global X that invests in 75 EV and self-driving companies. If EVs continue to grow and dominate the auto market, investing in this should reward you while also making sure your money isn't stuck in the next Yahoo.
In this post we wrote a few years ago, we look at the details of the rise and fall of Pets.com, another poster child of the tech bubble's insanity.
Today's conventional wisdom says that Pets.com was basically a joke and another example of investor greed. What survives to today seems like there was nothing to the company besides the infamous sock puppet and millions of dollars in money spent on ads.
But is there more to Pets.com than that? In this post, we argue that Pets.com was actually a great idea, one well ahead of its time that nearly led to historic returns for its investors .
What We Are Reading and Watching This Week
This is a recording of a webinar my firm did for clients who wanted more detail on their investment portfolios. We look at the data of how active investors perform, and why index investing have trounced the investing pack.
Speaking of bubbles, the cryptocurrency bubble was one for the record books. This new book looks like a promising insight into the going ons at the epicenter of the bubble.
Curious how you stack up to the average saver in America? Vanguard is out with their annual report.
Charlie Munger and Warren Buffett have said numerous times that their success is not due to making tons of incredibly intelligent decisions, but instead just avoiding big mistakes.
This article does a great job of identifying a few of those big mistakes that investors make.
Our YouTube channel is full of videos on stock market history, how-to videos, product and book reviews, and more!