Everyone who owned common stocks in the U.S. went through hell in the first quarter of this year. The 36% decline in the S&P 500 Index in February and March was the fastest 36% decline of my lifetime. This hell was especially damaging to those of us who have a positive view of the U.S. economy over the next ten years.

[…]We will present the most difficult investment junctures of the last 40 years, tell you what was popular and what produced the highest future returns. We will consider looking foolish with the goal of obtaining long-term wealth creation in common stock ownership.[…]

Virtually every major athletic and business endeavor has been governed over long periods of time by a set of standards or morals. In basketball it helps to be tall, in baseball it helps to run fast and throw hard and in football it helps to be physically strong. In business it helps to have capital, sales, profits and free cash flow. We believe that the morality of common stock investing gets unhinged after an extended period of easy money and low interest rates.

In the famous book, Strange Case of Dr. Jekyll and Mr. Hyde, Dr. Jekyll and Mr. Hyde were one human being with a split personality. Dr. Jekyll healed people and Mr. Hyde murdered them. This economic environment and the U.S. stock market have the same kind of split personality. The economic environment has been healing people with jobs, consumer confidence and a bright demographic future. At the same time, in the second half of 2018, the Mr. Hyde stock market took investors out back to a slaughter, knocking a swift 18-20% off major indexes and punishing over-priced glam tech stocks even more.

The current circumstance in the U.S. stock market reminds us of the mid-1960s. We thought it would be helpful to review what was going on back then and what took place in the following 16 years. It makes us believe that you want to own wonderful businesses and de-emphasize trust in the stock market’s ability to meet the financial goals of long-duration investors.