We can now close the books on the first quarter of the New Year, and it was one of the more challenging three months in recent history. So, let’s step away from the news flow for a few minutes and look at twenty-two fun facts for 2022. Some pertain to investing, some show just how much the world has changed over the last half century, and a few are completely random.
- Wall Street is named after an actual wall. The barrier was built in 1653 to protect Dutch colonists who ruled Manhattan from the British and Native Americans.
- In New York City, the price of a taxi medallion has fallen from a peak of $1.3 million in 2014 to a low of $80,000 last year1. Ridesharing companies decimated the value of these medallions, and now Uber is enlisting NYC taxis on their platform to help them deal with a surge in demand. What was once an adversarial relationship may evolve into a partnership.
- The Bloomberg Global Aggregate Index, a benchmark for government and corporate bonds, has fallen 11% from a high in January 20213. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. Here in the U.S., this most recent quarter was the worst since the early 1980s.
- Apple generated roughly $192 billion in revenue over the last four quarters on the iPhone alone. For scale, only ten companies in the S&P 500 generate more revenue than the iPhone3. Meaning, total sales for behemoths like Microsoft, Home Depot, Proctor & Gamble, and J.P. Morgan were smaller than what Apple made on one product line.
- Nearly 60% of all online retail purchases in the U.S. were done on Amazon last year4. That equates to just about $1.3 billion in sales every day of the year.
- China owns very little of total U.S. debt. While it varies over time, China only owns about 3.9% of our debt right now. But even if China owned 80%, it’s not collateralized like other debt. It’s only backed by the “full faith of the U.S. Government.” That’s nothing more than a promise to pay it back. Meaning, China or any other country’s share of U.S. debt gives them zero leverage to shape our policies and/or way of life.
- The U.S. government and its citizens own most of its government debt. To be more precise, 75 cents of every dollar of debt is owned by a U.S. government agency, citizen, bank, insurance company, etc. Hence, when the government pays interest to its debt holders, it is paying most of that interest back to itself.
- Now that COVID restrictions are being lifted, traveling is back. For those planning a trip this year, take comfort in knowing the circulated air on airplanes is not as bad as we are led to believe for three reasons:
- Filtered: Most airplanes use hospital-grade HEPA filters, which remove 99.97% of bacteria, as well as air particles that viruses use for transport.
- Refreshed: Cabin air is completely refreshed 20 times per hour, compared with just 12 times in an office building.
- Compartmentalized: Cabins are divided into separate ventilation sections about every seven rows, which means that you only share air with those closest to you.
- Fidel Castro spent his life fighting capitalism, only to die on Black Friday. Despite its flaws, the U.S. economy is one of the most powerful forces in the known universe because it’s fueled on free market capitalism and an incentive structure that rewards entrepreneurship and innovation.
- Warren Buffett has been at the helm of Berkshire Hathaway for over 50 years, and in that time, the stock has outperformed the S&P 500 by over 2.8 million percent5. However, the chart below shows that his company’s stock has also underperformed the S&P 500 one out of every three years. On a month-by-month basis, he has been no better than a coin toss.
Three lessons here. First, if one of the smartest and most skilled investors can’t consistently beat the S&P 500 on a daily, monthly, or even annual basis, then neither can you or I. Second, don’t take annual returns too seriously. Think about what an investor would have left on the table had they “fired” Buffett after a year when he lost to the S&P 500. Third, Albert Einstein famously said:
“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
- The United States generates more than 20% of the world's gross domestic product (GDP) with only around 4% of the world's population. Talk about efficiency.
- The gas gauge in cars also informs a driver of the location of the gas tank. There is a little triangle next to the tank icon that points to the left or right. You’ll thank me the next time you rent a car.
- Pablo Escobar’s cartel spent an estimated $2,500 a month on rubber bands needed to hold stacks of bills together. That’s because they were bringing in $420 million each week in cash. According to his chief accountant, Pablo was earning so much that each year they would write off 10% of the money because it would get eaten by rats in storage, damaged by water, or lost. That added up to around $2.1 billion each year6.
- The grooves on coins serve a purpose. A quarter has 119 grooves around the edge, and a dime has 118. The grooves were added to keep people from scraping off the coin faces and selling them as precious metals.
- We are living longer.
The chart below shows the rise in life expectancy for men and women since the 1950s due to advances in medicine, healthier lifestyles, and education.
According to the Centers for Disease Control and Prevention (CDC), the average U.S. life expectancy rose for the last five consecutive years. As of 2019, the average life expectancy for women was 81.4 years. For men, it was 76.3. Furthermore, American men who reach age 65 will live another 17.8 years on average, while women will live 20.3 years, and 47% of couples will have a spouse live past 907.
- Cash is losing money safely. The chart below depicts the yield on 3-month Treasury bills, which is a proxy for cash investments and supports two painful truths. First, cash has earned virtually no return for almost 12 years.
Add in the effects of inflation and the story gets worse. As of March 31, 2022, the average income earned on $100,000 in a savings account was $708. The income needed to beat inflation was $7,9009. That’s 112 times the amount of income earned.
Second, the dotted line represents the average yield over this period at 3.36%. What is less obvious is that it took 34 years to get back to this long-term average after the Great Depression. If history does repeat itself, we could be down here for a while.
- “Forty” is the only number whose letters are in alphabetical order. No number from 1 to 999 includes the letter "a" in its word form, and "spoonfeed" is the longest English word with its letters in reverse alphabetical order.
- The “metaverse” concept is simply enormous. According to Bernstein Research, the combined annual run-rate of the most relevant markets is $2 trillion and growing. Furthermore, a recent report from Gartner estimates that by 2026, 25% of people will have at least one hour each day in the metaverse for work, shopping, and education, and 30% of organizations in the world will have products and services in the metaverse10. Evolutions like these don’t come around often and cannot be ignored.
- Gold hasn’t kept up with stocks. Add in the effects of inflation, and the chart below shows that gold has returned 97.5% over the last 40 years. The S&P 500 is up 1,247% after inflation, or 13x higher than gold.
- Companies that grow dividends consistently over time have outperformed. The chart below shows the performance of S&P 500 companies from 1973 through 2020, segmented by dividend payment policy. Three conclusions are worth noting:
- Dividends Pay: Investing $100 into stocks that paid consistent dividends (dark blue line) would have been worth $6,946. Investing in stocks that paid no dividends (orange line) would have only been worth $844, or 88% less.
- Dividend Growth Pays More: Owning stocks that grew dividends (light blue line) would have returned $11,346, or 63% more than picking stocks that paid consistent dividends.
- Cutting Dividends Stings: Owning stocks that cut or eliminated dividends (dark green line) would have been worth $56, indicating the risk of picking stocks unable to support their dividend.
- MrBeast is currently the reigning champ of YouTube. Forbes recently reported that he earned $54 million in 2021 by posting videos online to his 89 million subscribers. The money comes mostly from ad revenues alongside videos of doing things like spending 24 hours in a house of ice and filling his brother’s house with slime11. How will success stories like these redefine the future for old school media and content?
Sources
1 https://documentedny.com/2021/11/23/taxi-cab-medallion-explained/
3 Bloomberg
5 https://www.berkshirehathaway.com/2020ar/2020ar.pdf
6 https://www.businessinsider.com/pablo-escobar-and-rubber-bands-2015-9
7 https://www.cdc.gov/nchs/data/databriefs/db395-H.pdf
9 Consumer Price Index, as of 3/31/2022
11 https://www.looper.com/757541/top-ten-highest-paid-youtubers-of-2021/
Disclosures
This newsletter/commentary should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.