Jim Cramer, probably the best known stock market personality, talks about the horrific drop of the major tech stocks in 2022. He's right, they tanked, a whole lot of shareholders lost a combined $5.4 trillion in value this past year.
Way back in the early 1990's, I thought becoming super rich was the key to living the life I wanted. That life was doing as little as possible to make a living, make a ton of money, and then I could go ride my BMX bike all day. I was 24 in 1990, and getting rich is on the minds of lots of 20-somethings, guys in particular. Hell, Save Ferris even has a song about this mentality. Anyhow, I started reading, and actually studying, the Forbes 400 magazine every year. The basic idea was, "Hey, here's a single magazine with 3 or 4 paragraphs about the top 400 wealthiest people in the United States. If I read this, I can learn what these people did right in the world of money, how they built their wealth, and what they're interested in as we head into the future. So I did that. Year after year, starting in 1990 or 1991, I think, I started studying that annual special issue, the Forbes 400.
I could, and probably will someday, write a lot about what I learned from studying the Forbes 400 magazine, every year, over about 20 years. But here's a few quick basics. I learned that about 1/3 of the wealthiest people in the U.S. inherited their fortunes. So being born into money is the best way to get super rich. Ask the Walton family, and the Mars (candy) family, among others. But that doesn't work for the rest of us, unless you marry one of those people. (Paris Hilton is taken guys, sorry).
The people who made huge fortunes, by and large, did it by building huge business empires, and then taking those huge businesses public, when they owned a huge chunk of the stock. The value of their stock surges when it starts getting traded in the stock market, generally. When I first read the Forbes 400, those main fortunes were much smaller than now, and many were big industrial companies like Levi Strauss, and Seagrams, that you'd never think of now. The tech billionaire thing was just beginning then, Steves Jobs and Wozniak from Apple, and Bill Gates and Paul Allen of Microsoft, were about the only tech wunderkids then.
Another way several people became super rich was through real estate. Even with the real estate crash of the early 1990's, a lot of the wealthiest people made a lot of their money through real estate then. Donald Bren of the Irvine Company, here in Southern California, is a prime example from that era.
The biggest shocker to me, was that, of the 400 richest people in the U.S. then (1991-992ish), ONLY TWO people became super wealthy by investing in stocks. Only TWO, out of 400. Those were, of course, Warren Buffet, and his partner, Charlie Munger, of Bershire Hathaway. Their main technique is called "value investing," which means buying large chunks of stock in really solid, well run businesses, usually ones that owned great brands (Coca-Cola, Dairy Queen, etc.). They did lots of research, found the companies they thought were the best overall, and then they... waited. They waited until the stocks in those companies dropped to a value they had already determined was a significant discount to the fundamental value of the business. Warren Buffet was taught an old adage by his mentor, "Buy when there's blood in the streets." When the world gets crazy, for whatever reasons, and investors turn their backs on solid companies, driving those stock prices down, that's when Warren and Charlie would buy big chunks of stock. And then they held those stocks... forver, if possible. They will sell at times, usually when a far better deal is happening, but it's rare. But the only two guys who actually invested their way to top 400 fortunes did it with a buy and hold strategy. Yes, there are also hedge funds and corporate raider types, that take over companies in hostile takeovers, and wind up with lots of stock. But that's far different than simply picking stocks and investing. Just of the record, I had one of these billionaires, Larry Ellison of Oracle, in my taxi once. Ever have a 20 minute, one on one conversation with a multi-billionaire? I have (He talked about his yacht, mostly, and it was 2003, he was only worth $9 billion then).
Now I'm a homeless guy, I have no money to invest, it's easy to dismiss this post. I don't care. I called the 2020 stock crash before it happened, and have made several other solid calls in the past 3-4 years, in this or other blogs. I've also made bad calls, of course. I'm not going to invest in stocks, even if I won the lottery tomorrow. But if I was, it would mostly be the stocks Cramer is talking about in the segment above, except for Facebook. I think they're in a long, slow downward spiral, but they'll still be around for years.
If I WERE going to buy stocks to hold for the next 5 to 10 years, and not touch them for that whole time, it would be the stocks Cramer is telling people to avoid above, I'd be buying them right now, or in the next month or so. Apple, Google (Alphabet), Amazon, and Microsoft. I'd throw in Pinterest and Shopify stock as well, because I just like those businesses, and they're down big as well in 2022. Then I'd just forget about them, and let them ride. I wouldn't touch any other stock out there. None of them. Yes, there are plenty of stocks that will have big gains, at some point. But I wouldn't bother looking for them. I think crypto and other things are far more interesting in the coming years. I'd just buy these stocks, forget about them, and hold them for at least 5 years. That's my personal opinion. This video above, that's as "blood in the streets" as it gets.
That's my thought on the stock market, as 2022 skids to a close.
Oh, by the way... close to half of Berkshire Hathaway's stock holdings are of Apple, according to the most recents reports. Berkshire stock, is up about 1.2% in 2022. The guys who have been buying andholding good stocks for 60 years or so. Berkshire's stock is about even for 2022, about the same performance as gold this year, when so many stocks tanked. Warren Buffet is 92 years old now, and Charlie Munger is 98. I wonder what they're buying right now...
This is just my personal opinion, do your own due diligence, and consult any experts you think will help before making your own investment decisions. And yes, this is another of my "told you so" posts that I will link to a year from now, or sometime in the future.
Closing prices on those stocks and some other investments today, for reference when looking at this post later on- 12/28/2022
Apple- $126.04
Alphabet (Google)- $86.02
Amazon- $81.82
Microsoft- $234.53
Meta (Facebook)- $115.62
Nvidia-$140.36
Tesla- $112.71
Berkshire Hathaway- $459,800.00
Pinterest- $22.86
Shopify- $32.64
Gold- $1,809.60 (per troy ounce)
Silver- $23.71 (per troy ounce)
Bitcoin- $16,556 per Bitcoin
Ethereum- $1,193.67 per Ether
Dow Jones Industrial Average- 32,875.71
Nasdaq- 10,213.29
S&P 500- 3783.22
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