How Covid DID NOT change investing
Covid changed the world in a big way. Total shutdowns. Many lost businesses. Free money from the government.
Covid definitely changed the direction of the market. But a lot of the market fundamentals did not change.
If you want to become rich you still need to be an investor/owner/creator.
Even through COVID many companies continued to pay dividends.
There was a pause on evictions across the country. That means landlords were not getting paid rent and people would not be evicted. But companies were still paying dividends. Not all companies.
Some companies like the auto makers and the airlines stopped paying dividends, but the majority of the dividend aristocrats like consumer staples and energy stocks continued to pay out their dividend. Even MTN - Vail resorts, which is all about skiing, paused their dividend and the quickly started it back up when everything reopened.
Dividends provide you with cash flow.
But they also contribute to the compounding effect of the stock market. Many people reinvest their dividends.
Dividends contribute to the overall return of your stocks over time.
Biden passed the Inflation Reduction Act. Which raised taxes on corporate share buybacks.
Dividends were already being taxed.
That means that companies are more likely than ever to return funds to shareholders through dividend.
2. Market rise over time
A lot of businesses went under during COVID. But most of them were small businesses, which eventually become big businesses.
But COVID really on lasted about 2 years and now nobody cares about the virus. We have a vaccine.
It was probably unnecessary to shut down the entire economy, but it happened and we now have to move on.
But the stock market has been around for a long time and 2 years is nothing compared to 50 years. Investors should still look to be investing over decades rather than single years. Unless you are a trader and then trade away.
If history is any indicator, the stock market will continue to increase over time and you will be reward to investing and holding.
3. The U.S. business market
The U.S. is the most business friendly market in the world.
China is in the number 2 spot, but look at all the problems they are running into. A communist government will always be skeptical of wealth. China has cracked down on their economy in so many ways that it will slow down for the next few years. But China also has more than 1 Billion humans, which means that it is a massive market that will eventually overtake the size of the US economy.
The American stock market is where it is at.
Every company on earth wants access to the American market. We have the secret sauce.
And people will always want to come to America to start their business.
Then grow that business. Then list that business on the NASDAQ or the NYSE.
The companies that are already here Amazon, Walmart, HomeDepot, they are not going anywhere and they will get bigger over time. That American business spirit was not killed during COVID. It was tested and hurt, but humans are resilient and life will go on.
4. Human nature
"I feel depressed. I have not been around another person in 8 days." One of my friends that worked in the office told me this during the pandemic.
I am just fine working from home and not interacting with other people. But I am an introvert.
There are a lot of extroverts out there that need human interaction.
I did miss going to concerts and live shows. People are creative and they want to share in a collective experience. COVID changed a lot of behaviors, like wearing a mask and wiping down surfaces.
But it did not change human nature.
The need for human connection and the value of service and the desire to travel and see the world.
5. Boring businesses
I have never thought that Warren Buffett is a genius. He is definitely a shrewd business many that understands money, investing, financing and taking advantage of the perfect opportunity.
What he does know about are boring businesses.
What is a boring business?
An example is Kroger. Kroger is a grocery store. And it is a beast.
There is nothing special about Kroger. It sells food to consumers and it tries to reach as many consumers as possible.
Buffett loves boring businesses. Products and services that humans will need for the rest of time. Food, energy, logistics, insurance. These types of businesses replicate themselves over time. The business grows a little bit bigger each year. But over time that grow adds up. Then they start paying out cash to shareholders. And increase that payout over time.
A boring business is one that is essential in good times and bad. It serves the masses and it works to grow the core business. Boring businesses tend to be the ones that last the longest.
6. Consumer debt
During COVID the government sent checks to American citizens. Some of those people still had jobs, some of them did not have a job. During COVID a lot of people cut back on spending. Because they were not allowed to go the restaurant or the movie theater.
And we did not know how long COVID was going to last so wanted to be cautious about how much money we needed to save for the long haul.
But Americans love to spend money. We live in the Instagram age. We see something shiny we want it now.
And we are not afraid to use debt to get it. Financing.
I'm not saying it is good or bad. Debt can sometimes be good in order to grow. I'm just saying that most Americans carry debt of some or many forms.
During COVID the savings rate went up, because people received money.
Post COVID Americans are back to spending money, travelling , restaurants, electronics. The savings rate has gone back down. Debt is going back up.
Biden has forgiven some student debt. Great for those that have student debt.
But the underlying issues that caused people to incur that debt are still in place and people will continue to rack up more debt.
Some people were using what is called Margin to invest, because loans were cheap. This props up the stock market, because people and institutions use margin to buy more stocks.
But the tide has turned. Interest rates are increase and so is the cost of outstanding margin loans.
The higher the interest rate the more money that must be pulled out of the stock market in order to pay back those loans. And then some of that money goes into government bond markets because bonds are finally paying out more than nothing.
But make no mistake, Americans still love their debt and will go back to using margin when the timing is right.
Education is an investment into yours and my future.
During COVID students were sent home to do class on their computer. This dramatically increased the need for a good computer. Computer sales skyrocketed.
But something wonderful happened.
When I was in college it always pissed me off that part of my course graded was tied to attending the class every single week.
I paid to go to college it should be my choice whether or not I attend class.
My real gripe was that so many lectures that I attended were worthless. Attending class was a waste of time. Some of the professors would read word for word the textbook and then assign homework at the end of the chapter.
I can read. And would learn a lot more forcing myself to read the chapter and completing the homework at the end. College is time consumer, I don't have time to waste it on worthless lectures.
Thank you COVID.
Finally it is acceptable to do classes online. Some classes are necessary to do in person. Science lab needs to be done in a science lab.
But pre-calculus can easily be taught online and probable is better taught online. I can watch a video and then rewind and rewatch the part of the lecture that I did not understand. And I can do it when my attention is at its highest, not when I am sleepy at 8AM.
Companies like Google finally came and said, 'You don't need a 4 year degree to do jobs at our company. You can take these online courses.'
The society education gatekeepers have been broken down.
You can educate yourself and make more money and then invest that money.
8. More online tools
People hate on the Robinhood app all the time. Have they made mistakes - Yes.
Did they spill oil in the Gulf of Mexico - No.
I do not think the Robinhood CEO, workers, investors or even users are evil.
But I do always have to give them credit. Because they pushed for investing to be more easy, open and accessible to everyday investors. There used to be gatekeepers that prevented you from investing.
But not anymore. Robinhood forced all the major banks to lower their fees and create an easier, online user experience.
COVID pushed technology to the forefront. People quickly became very comfortable using apps for Food, work, shopping and investing.
Every single financial firm and tech companies put more effort into developing online tools for their users during this time and this will benefits consumers now and down the line. People will be able to have all of their finances online and make money online.