American Consequences - June 2019

constant devaluations engineered by central banks... where is there any permanent value? What’s the safest form of cash available today? Because, unless you have a substantial amount of cash, it will be difficult (or impossible) for you to act on the other strategies you will want to pursue during a bear market. Therefore, the most important thing you must do to survive a bear market is raise a substantial amount of cash. STRATEGY NO. 2 OWN ‘FOREVER’ STOCKS The idea that you ought to buy and hold stocks even though you know a bear market is approaching or intensifying will seem like nonsense to a lot of investors. Just keep in mind, we’re not stockbrokers. We’re not asset managers. Our livelihood isn’t affected by whether you keep your investments in stocks... or move them out of the market altogether. I’m offering this advice because it’s what we’d want you to tell us if our roles were reversed. I’ll show you which kind of stocks you should consider buying and holding forever – even if we are heading into a bear market. But before we get into the stock-specific discussions, let’s review a characteristic of stocks that we look for in good times, and is especially important in bad market times... In a bear market, you should focus on buying what we call capital-efficient stocks. Simple question: Do you think you could

name any of the 20 best-performing stocks in the benchmark S&P 500 Index in the 50 years between 1957 and 2007? University of Pennsylvania Wharton Business School economist Jeremy Siegel wanted to answer this question thoroughly. It’s not as easy to figure out as you might think, because the composition of the S&P 500 changes frequently. Siegel had to go back and get the actual list of stocks from 1957 and then follow each one carefully to see how much they paid out in dividends, spinoffs, mergers, and liquidations. So... what were the 20 best-performing stocks over that 50-year period?


Annualized Return

Philip Morris Abbott Labs Bristol-Myers Tootsie Roll

20% 17% 16% 16% 16% 16% 16% 16% 15% 15% 15% 15% 15% 14% 14% 14% 14% 14% 14% 14%







H.J. Heinz


Fortune Brands


Schering-Plough Procter & Gamble

Hershey Foods


Royal Dutch Pet. General Mills


June 2019

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