Good morning, and a belated welcome to November!

I took last week off from the newsletter, so we have plenty to catch up on.

I wrote about inflation here, arguing that some common claims about popular strategies to fight it might be inflated themselves.

The rate on I bonds, or inflation-protected U.S. savings bonds, hit 7.12% at the beginning of the month. If you don't buy any at that yield, which is assured through April, you should have your head examined. (I wrote about I bonds earlier this year and later answered readers' questions here. To buy, you have to be a U.S. resident or citizen, or a civilian employee of the U.S.)

Facebook changed its name to Meta. In this weekend's "Back in Business" column, I explored historical lessons on when and how a new corporate name can backfire.

Elon Musk said, in a cynically cheeky series of tweets, that he will sell 10% of his Tesla stock.

And, on Nov. 1, the Dow Jones Industrial Average hit 36000, more than 22 years later than a popular book predicted it would. I took a light-hearted look at that here.

Aggressively escalating price targets tend to be one anecdotal sign that markets are overheating. Back in 1999, book authors outshouted each other trying to predict how high the bull market would go — mere months before the worst decline in a quarter of a century.

I kept these books on the floor of my home office for reference while I worked on my story, but I think I'm done with them.

The day after the Dow hit 36000, James Glassman, co-author of the book of that title, wrote a piece for The Wall Street Journal's opinion page in which he predicted that the index would reach 1,573,865 by the year 2071.

That would imply a compound annual return of approximately 7.85%, not counting dividends, or a total return of between 9% and 10% annually from today's levels.

Warren Buffett has sometimes given people a little pop quiz that goes roughly like this:

Where do you expect the Dow Jones Industrial Average to close on Dec. 31, 2099?
100,000
1,000,000
10,000,000
100,000,000

That's just over 71 years from now. If the Dow grows at only slightly more than 4.3% from roughly 36300 this week, it will hit 1,000,000 by then. That doesn't include dividends, so it assumes roughly a 6% total return once dividends are accounted for.

I would expect to see Dow One Million around then, probably a few years later. Well, I won't be around to see it, but some of you will!

(Just FYI, the WSJ stylebook dictates that we use a comma for index values only after they exceed 100,000.  “¯\_(ツ)_/¯“)

The investor Raoul Pal got a lot of people talking a few days ago with a series of provocative and profane tweets arguing that the young individual traders who swarmed the financial markets in 2020 have transformed investing permanently.

Mr. Pal summarized conventional wisdom as:

That's not a bad distillation of what many older investors think, which Mr. Pal then pushed back against:

Then he added:
          Unlike their parents in their 30's, they didnt get gifted equities with a P/E of 7, bond yields at 13% or real estate at the lows versus income. They got the opposite. Their opportunity set was an expected negative future returns. They didn't want any part of our financial system....

           Millennials and Zoomers had nothing to lose. They had nothing.
           Then the pandemic hit and everything changed.
           We gave them free money and they collective[ly] said "f*ck it" lets take risk because their stake was free.

          If we were given a free stake at the casino, we would do the same.
           But they didnt buy our precious gold miners, or our discounted value businesses. Why? Because they don't care about 10% returns. The only way to level the playing field was to take MASSIVE risk.

           ....These young people had been let down by us all. Why should they play by our rules when they could make their own?

          Screw active management, screw hedge funds. They wanted to just stick money in the markets as they were told (Hello passive!) and punt the rest.
           Crypto resonated. Huge upside, downside of zero. It was a giant options market. Limited losses, exponential upside.
           They are right.

           ....They changed to rules to suit them A set of rules where we cant compete. Not the hedge funds, not the regulators, not the wisened old hands. None of us.

It's worth noting that just about every revolution that changed human history was underestimated by the people it ultimately swept away. So I could well be wrong in thinking Mr. Pal is wrong.

But I do. When he writes:
Unlike their parents in their 30's, they didnt get gifted equities with a P/E of 7, bond yields at 13% or real estate at the lows versus income. They got the opposite...

...he implies that older people got the benefit of a kind of Golden Age of investing.

Sure, U.S. stocks compounded at 17.6% annually during the 1980s and 18.2% in the 1990s. On average, stocks doubled roughly every four years.

But the S&P 500 has compounded at 16.2% over the past 10 years. It's up 27% so far in 2021. That doesn't sound like a Tin Age or Iron Age to me.

In the 1980s and 1990s, nobody thought it was a golden age. In the early 1980s, when Treasury bond yields were at 13%, inflation was raging at up to 12%. Stocks crashed 23% in a single day in 1987; bonds tanked in 1994; stocks got hit again in 1990 and were flat in 1994.

When stocks are valued at seven times earnings, as they were back in 1982, no one wants to own them. Brokers flogged oil and gas partnerships instead, tax shelters that bilked investors out of billions. Most people spent the 1980s and 1990s drastically underexposed to stocks, missing out in real time on the returns that look so attractive in hindsight.

The 401(k), in 1982, was still commonly called a "salary-reduction plan." (Gee, sign me up!) In those "good old days," mutual funds charged larcenous annual fees of up to 2%, almost nobody owned index funds, and if you paid only a 1% commission to buy a stock you'd thank your lucky stars.

Investing has always been hard. Speculation is now much easier than it's ever been. That's what's changed, not "the rules." Sooner or later, the people who think they've figured out how to get rich quick will learn that making money is vastly easier than keeping it.

Twenty years ago today:

It sounded like a plausible idea at the time:

According to a 2018 report by the Federal Communications Commission, usage of pay phones peaked in 1999, with more than 2.1 million in service across the U.S. 

Almost exactly 10 years later, in October 2011, Verizon agreed to sell nearly all of its remaining 50,000 pay phones to Pacific Telemanagement Services, a California firm.

By 2013, as mobile phones became near-universal, only about 200,000 pay phones were left in service nationwide, according to the FCC. By 2016, under 100,000 were left.

As my colleague Sarah Needleman wrote in 2018, phone booths were making a comeback in open-plan offices, where "doing away with partitions...left workers with no outlet for peace or quiet."

Then the pandemic hit. Now that so many of us are working remotely, companies are selling miniature versions you can install in your home office. Maybe the phone booth isn't going the way of the dodo after all. It's just moving indoors.

Here are some of the best things I found over the past week outside The Wall Street Journal:

• Warren Buffett does not just read all day (Neckar blog)
• When selling a stock is a mistake (John Huber)
• We're at peak FOMO (Ben Carlson)
• Do women invest better than men? (New York Times)
• What top index funds have in common (Morningstar)
• How to persuade people (Bob Cialdini with Shane Parrish)
• Why China banned bitcoin (Wired)

Here are some of the best things I found recently in The Wall Street Journal:

• Elon's selling Tesla. So should you (James Mackintosh)
• Young people don't want financial advisers (Rachel Ensign and Peter Rudegeair)
• Options trades make brokers rich (Alex Osipovich and Gunjan Banerji)
• 3-D printed houses! (Nicole Friedman)
• Where $100,000 in hospital bills comes from (Melanie Evans and Tom McGinty)
• Boost your benefits during open enrollment (J.J. McCorvey)
• How to avoid being weird when you go back to the office (Rachel Feintzig)

Have you done anything to reduce the riskiness of your portfolio before the end of the year without triggering a big tax bill?

To share your thoughts, just hit reply to this email. Answers may be lightly edited for space or clarity. Please include your name and city, thanks!

In our Oct. 26 newsletter, I asked:

Have you ever made an investing mistake you could have avoided with a few seconds of clear thinking? What was it, and what did you learn from it?

Researching companies or stock tickers I’ve heard of in the same website/brokerage account [where I trade] has led me to make “impulse buys” like a kid in in the supermarket check-out line....I’ve learned that I should research companies in detached websites (e.g. Yahoo Finance) where it takes multiple follow-on steps to log on to my brokerage account if I really want to buy a company’s stock. And I usually change my mind in the time it takes to log on.
—Dax V. Stoner, Bloomington, Minn.

     I have been [a financial adviser] since 1976....In every [market setback] I advised my clients not to join a panic, to just sit tight, this too will pass.
     Last year at the advent of the pandemic I thought “this time it’s different” and advised some reductions in portfolios. Boy, was I wrong! "This time it’s different" is probably the most dangerous thought for investors to have.
     We are never too old to be taught a lesson. 😁
—Lynne (no company name please)

I was sure that Hewlett Packard was way underpriced. Without a moment more thought I bought HP—which is Helmerich and Payne Inc. (a drilling rig and technology company) NOT Hewlett Packard. I only discovered the error a few days later after HP had dropped in price a few dollars. Ouch! Learned my lesson. I always do a detailed review of the order prior to hitting that key.
—David W. Brooks II

Be well and invest well,

Jason

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If something takes too long, something happens to you.  You become all and only the thing you want and nothing else, for you have paid too much for it, too much in wanting and too much in waiting and too much in getting.
—Robert Penn Warren