One of the biggest lessons I have learned in 30 years

“We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now.” - Warren Buffett, the world’s most admired, least imitated investor, in his annual letter to shareholders 30 years ago this month, dated February 28, 1989.

On February 28, 1989 I was 10 months into my first full time position as a self-directed RRSP clerk at Royal Trust in Ottawa. It was the last day of my first RRSP season. Back then it was use-it or lose-it in terms of making an RRSP contribution. Investors used to line up in order to make a contribution before the deadline. We were open till midnight. Exciting times.

On that same date, the Standard & Poor’s 500 Stock index closed at 288.26. As of today (February 27, 2019) it is trading over 2790, more than nine times where it was on the day of Buffett’s letter. Of course, this ignores dividends.

The cash dividend of the S&P 500 for the full year 1989 was $11.73. For the year 2018, it was $53.61, a bit more than four and a half times where it was in 1989.

To get a sense of how these increases compare to inflation, note that the consumer price index stood at 122 in February 1989. In December 2018 it was 253, having slightly more than doubled in the interim.

When will we ever learn? It was never about “timing the market”. It is always about time in the market.