Yesterday’s violent sell-off was a reminder to recall Benjamin Graham’s advice: “In the short run the market is a voting machine, but in the long run, it is a weighing machine.”
I don’t pretend to have any insights as to the future direction of stocks, but I would caution against quick judgments. A grandson, a graduate student, born in 2001, asked me yesterday if he should be concerned about the market. While we should always be alert, ‘concerned’ was too strong a word. I told him that the compounded annual price return of the DJIA, since he was born, was about 6%, roughly the same annualized return since I was born 84 years ago. Not that that means anything, other than to suggest stocks may be fairly priced, but one has to expect volatility. Stocks can become overvalued, just as they can become undervalued. Five years ago, the market acted violently to the outbreak of COVID. In March of that year 20 days out of 23 trading days had the DJIA up or down more than 1.5%. On March 12, the Index was down 10%; the next day it was up 9.4%. Uncertainty leads to volatility, but long-term investors have always benefitted by the magic of compounded returns – that the market, in the short term, is a voting machine, but in the long term it is a weighing machine.
Now, on to today’s TOTD, which has nothing to do with the market.
Sydney M. Williams
www.swtotd.blogspot.com
Thought of the Day
“Europe – One Man’s Perspective”
April 4, 2025
“Europe was created by history. America was created by philosophy.”
Margaret Thatcher (1925-2013)
British Prime Minister, 1979-1990
I remember my first trip to England, looking out from the plane’s window at the island’s green fields, thinking that it was from this place that most of my ancestors sailed westward across the Atlantic to a new world. Most were poor, traveling as indentured servants, but endowed with a belief in the promise of a new start in a new world. They were driven by optimism, a belief that an unknown future in a strange country would be better than what was ordained for them at home. It was with a sense of wonder and pride in their courage that I gazed at a land that, had they not emigrated, I might have called home.
However, what prompted this essay were recent condescending remarks of Vice President J.D. Vance and Defense Secretary Pete Hegseth. In his February 14th speech in Munich, Mr. Vance said, “What I worry about is the threat from within.” While I am sympathetic to the idea of the threat from within – a failure to focus on economic growth, anti-democratic attempts to silence opposing opinions (for example, the extraordinary treatment of Marime Le Pen), and the failure of most European nations to assimilate hordes of migrants seeking refuge, and the consequence of their impact on culture. However, his patronizing tone unnecessarily imperils our relationship with Europe. And the comments by Vance and Hegseth, relayed by Jeffrey Goldberg of The Atlantic, from what is now being called “SignalGate:” Vance: “I just hate bailing Europe out again.” Hegseth: “I fully share your loathing of European free-loading. It’s pathetic.” While it is true that most European countries have not complied, until recently, with the two percent rule for defense contributions, most have increased their spending since then President Trump made a fuss in 2017. They should give credit where credit is due
Americans should be careful about belittling old allies. The United States – for better or worse – is far different than Europe. More than a hundred and fifty years ago, Henry James wrote to Harvard professor Charles Eliot Norton: “It’s a complex fate being an American & one of the responsibilities it entails is fighting a superstitious valuation of Europe.” Unlike Europe, where migrants mostly live segregated lives, years of assimilation in the U.S. have produced a multi-cultural population, so that almost all Americans, whether white, black or Asian, can trace part of their ancestry to one country (or several) in Europe.
And consider what Europe has gifted us over the Centuries: Artists like Michelangelo, Rembrandt, Constable and Picasso. Writers like Tolstoy, Jane Austen, Victor Hugo, and Dante Alighieri. Composers like Bach, Vivaldi, Debussy and Tchaikovsky. Scientists like Archimedes, Galileo, Darwin, Einstein and Enrico Fermi. Thinkers and philosophers, from Plato and Aristotle to Adam Smith, Voltaire and Nietzsche. Think of the palaces, museums and cathedrals designed by architects like Louis le Vau, Bernini, Juan de Villanueva and Christopher Wren.
These are gifts from the past that keep on giving, as can be heard in any symphony, seen in every museum, and read in libraries and classrooms. But what about the present and the future? The European Union is a worthwhile experiment. Keep in mind, the Continent was embroiled in two world wars in the 20th Century. Peaceful coexistence is better than war. But there remains much that is unknown. Will a united Europe retain the customs, cultures and languages of their individual states? Or will it become an amorphous mixing bowl? George Washington once, allegedly, forecast: “Someday, following the example of the United States of America, there will be a United States of Europe.” I hope so.
During the Cold War, Western Europe and the United States were united in their pledge to defeat the scourge of Soviet Communism. Europe was divided, because of an imperialistic Soviet Union, by what Winston Churchill described as an “iron curtain” that had “descended across the continent.” One consequence was the formation of NATO three years later, in 1949. Russia’s continued belligerence, after the collapse of the Soviet Union in 1991, meant that NATO remained relevant, but the situation changed. Russia was smaller, but still the possessor of thousands of nuclear weapons, and had aligned with other totalitarian regimes like China, North Korea and Iran. Europe, after being battered in two World Wars, a decade-long global depression, and a forty-five-year Cold War, focused on becoming social welfare states. Since the end of the Cold War, E.U. nations have spent roughly ten times as much on “social protection” as on defense. (Eastern Europe, with close memories of Soviet occupation, spends less on welfare and more on defense than does Western Europe.)
But that generosity has brought other problems. As Margaret Thatcher once said: “The problem with socialism is that eventually you run out of other people’s money.” Europe has not focused on the productive side of its economy. In 2023, the U.S., with a population 110 million less than that in the E.U., produced a GDP 62% larger. Since the turn of the millennium, Europe’s economy has increased 134% versus 172% in the U.S. Europe needs to ensure they can continue to afford the governments and societies they have created.
As well, the continent has a more significant problem – an unaddressed demographic problem, which will further affect their future well-being. Not enough women are having babies. The total fertility rate (TFR) in Europe in 2023 was 1.38. The last time that rate was above replacement (2.1) was 1974. Today, the population of the European Union stands at 449 million, with an average age of 44.7. Projections suggest that the population in Europe by the end of the Century will decline to 420 million, with an average age in excess of 50. Europe is not alone with this demographic challenge. South Korea, Taiwan, Singapore, Hong Kong share the dubious distinction of having the planet’s lowest birth rates. China at 1.18 and Japan at 1.26 are both below Europe’s. The United States’ is higher but at 1.78, still below replacement. Low birthrates in Europe are being offset by increased migration. For example, in 2023 3.67 million babies were born in the E.U., while 4.6 immigrants arrived from non-E.U. countries. Nevertheless and as mentioned above demographers suggest the population will continue to age, and their culture will change to accommodate their changing populations. No one knows what the economic and cultural effects will be, but over the past several decades growth rates have shown a persistent slowing, yet the welfare state continues uninterrupted. That trend is unsustainable.
Nevertheless, for reasons both sentimental and practical, Europe is worthy of our friendship. It is the first line of defense against Russia. As well, it is our past and, given what it has produced over the past two thousand years, it is a fount of inspiration and brings pleasure to our futures. Despite despots and kings, wars and famines, the world is a better place because of Europe. It needs a correction but deserves our respect.
Labels: Donald Trump, Henry James, J.D. Vance, Jeffrey Goldberg, Margaret Thatcher, Marine Le Pen, Pete Hegseth
