Introduction to Investing and 1960s Influences

Key Insight

The U.S. in the 1960s was characterized by an aspirational and inspirational ethos, driving individuals towards noble objectives. John F. Kennedy, a charismatic and intelligent figure, profoundly influenced this thinking by articulating compelling visions of global improvement, encompassing space exploration, equal rights, and poverty elimination. During this period, the United States stood at its global zenith, contributing 40 percent to the world's economy, in contrast to approximately 20 percent today. The dollar was the international currency, and the U.S. maintained a dominant military. 'Liberal' was associated with rapid and equitable progress, while 'conservative' implied resistance to change, with the nation widely seen as prosperous, forward-thinking, well-managed, and committed to continuous advancement.

Amidst a burgeoning stock market where widespread financial gains were evident, the subject, at twelve, began caddying at a golf course named Links. Using his earnings, he made his initial investment in Northeast Airlines, choosing it solely because its shares traded below $5, operating under the flawed assumption that more shares equated to greater profit. Despite this 'dumb strategy', his investment tripled, a stroke of luck as the airline was nearing bankruptcy and subsequently acquired. Misinterpreting this success, he became convinced that market profits were easily attainable, leading to his enduring interest.

Driven by this early success, he proactively built an investment library by ordering free annual reports from Fortune 500 companies via mail coupons. As the stock market continued its upward trajectory, the hardships of World War II and the Depression faded into distant memory, fostering a common belief that investing simply involved buying stocks and watching them appreciate, supported by the notion that economic management had evolved into a science. Stocks had nearly quadrupled over the prior ten years, making 'dollar-cost averaging' a popular strategy, though picking individual 'best stocks' was also highly sought after. Throughout these formative years, he exhibited independent thought and a willingness to embrace risks for rewards, fearing boredom and mediocrity more than failure, believing 'great is better than terrible, and terrible is better than mediocre, because terrible at least gives life flavor.' Unbeknownst to him, 1966, his high school senior year, marked the market's peak, after which his early investment assumptions would be disproven.