2015-08-16

Investing, Jack Bogle, Warren Buffett, S&P 500 Index, US, China

S&P 500 Index graphic (from $83.30 on 12 Sep 1975 to over $2000 today)
S&P 500 Index (source:google.com) from $83.30 (12 Sep 1975) to over $2000 today
"As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing. One of my favorite rules is 'Don't peek.' Don't let all the noise drown out your common sense and your wisdom. Just try not to pay that much attention, because it will have no effect whatsoever, categorically, on your lifetime investment returns."--Jack Bogle, Vanguard Group (domain name: vanguard.com) (quote source: Marketwatch)

"Put 10% of the cash in short-term government bonds and 90% in very low-cost S&P 500 index fund. (I suggest Vanguard's [VFINX].) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions or individuals -- who employ high-fee managers."--Warren Buffett, source: instructions to Trustee for his wife (pdf)

“Returns are created not by the stock market, they are created by U.S. business, our corporations ... If you go back and look at the history of American business over the last century, you will find the [price/earnings] effect of stocks is zero. All of the returns are created as investment returns, dividend yields and earnings growth." -- Jack Bogle, Marketwatch, supra.

S&P 500 Index chart (via google.com)

S&P 500® - S&P Dow Jones Indices: "The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization." (more info at the link above) TICKER : SPX

S&P 500 Index month-end ten largest holdings 
(18.0% of total net assets) as of 06/30/2015
1 Apple Inc.
2 Microsoft Corp.
3 Exxon Mobil Corp.
4 Google Inc.
5 Johnson & Johnson
6 General Electric Co.
7 Wells Fargo & Co.
8 JPMorgan Chase & Co.
9 Berkshire Hathaway Inc.
10 Procter & Gamble Co.

The success of Silicon Valley is attributable, in large part, to the capital markets of the United States. How did Apple, Google, et al become among the most valuable corporations in the world with total market capitalization values of hundreds of billions (USD) dollars each? Why did Alibaba Group, a Chinese internet company, select the NYSE for its IPO?

Take a real good look at this map.
The world's free-float market capitalization (USD$ billions) by nation:
1. United States 19,731
2. Japan 3,006
3. United Kingdom 2,691
China? 889.

Bank of America: These Five Maps Show the Major Global Trends Investors Need to Know - Bloomberg Business"American Equity Exceptionalism: As of July 31 (2015), the market capitalization of U.S. stocks totaled nearly $20 trillion (as measured by MSCI), marking the reemergence of America's dominance among global stock markets."The U.S. currently represents 52 percent of world market capitalization, the highest since the 1980s," says BofAML.America's hefty share of global equity-market capitalization has been buoyed this year by a continuation of the U.S. dollar's appreciation against other major currencies."

Angel funding,venture capital, deal flow, even the domain name industry (e.g., GoDaddy IPO), are, in large part, dependent upon free capital markets. China has the world's largest internet population, but as this past week showed, they are lacking in free capital markets, as well as free speech and high GNI per capita. These are big problems that China has yet to confront. In addition, China is no longer the "low-cost" producer of the world's goods--the one competitive advantage it had. However, China's present and future tribulations will likely have a big impact on the world economy for the foreseeable future.

Caveat Emptor!


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