Wisdom may be gained from many sources – including people who disagree with us.
Most successful investors we have known became wealthy by holding their portfolios through thick and thin. Their example has strongly influenced our own aversion to “market timing” – wholesale dumping of stocks because we expect a market decline, which can be self-defeating. You might be wrong and the decline never comes, leaving you behind as the stocks you sold move on up. Or, even if you’re right and there is a price drop, you do not know when to get back in and miss much of the recovery. You’re out of the market when you ought to be in. We will, of course, sometimes trim a position if the upside seems limited, or if cash is needed somewhere else. But completely bailing out of a portfolio is not our style. Wealth is built by accumulating assets.
However, there are other ways of thinking. Now and then you will meet a very intelligent person who favors a more trading-oriented approach for their entire portfolio, which may work for them. This eternal debate over strategy makes our job interesting, challenging, and fun. We hope you will enjoy the interview that follows, with a man we knew 24 years ago. We may not agree with all of it, but let’s hear him out ….
Thoughts on Stock Valuation:
A Fort Wayne Businessman Talks about Investing (2002)
I’ve been pretty much out of the stock market since about 1998. You know why I got out? It was the way all these huge companies were projecting 15% growth year after year. That’s when I knew it was getting crazy.
Since the 1970s, I’ve made my living in retail. In our heyday we had five stores. I can’t even grow my little business 15% a year. How are they going to do it with a big corporation? There’s no way. Maybe the first couple of years with a tiny new company, but after you get the business going, things slow down. You have up years, and you have down years.
I’m also part owner of a little bar. I didn’t really want to own a bar, but this friend of mine wanted to open one and asked me to lend him some money. It’s not very successful – after paying the help and taxes and everything, he nets maybe $10,000 a year.
Well, a couple of years ago (2000) he told me he’s buying stock in America Online at around 50 times earnings, because it has a great future. I said to him, “Are you crazy? Look at your bar, just limping along, would you pay half a million dollars for something that earns $10,000? That’s what fifty times earnings means.” No sensible person would pay that much. You’re only making 2% on your money.
I never bought any internet or dot.com or technology stocks. I agree with Warren Buffett, you shouldn’t invest in something unless you understand it. For example, Oracle, I don’t begin to understand that business, and I’ve stayed away from it in my investing.
Most of my life, I’ve been selling home furnishings. And I can almost promise you that the things we have in this store will cost a little more five years from now, pretty much in line with inflation. But look at the technology business – every new product starts right away to get cheaper. Competition builds a better one, pretty soon your new product is getting obsolete, and down goes the price. So just to stay even, you have to sell a lot more of them. It’s a heck of a lot harder to grow your sales and earnings in a business like that.
So anyway, about four years ago I sold most of my stocks. I kept maybe 15 percent and put the rest into bonds, bank CDs, whatever gives me a decent rate of interest. I missed some of the bull market, but I sleep at night. Some day I’ll go back into stocks, when I’m comfortable with it.
One stock I held onto was General Electric. I owned a lot of it. I kick myself now for going against my own common sense – because I could see GE was selling up there at 40 or 50 times earnings, way overpriced. But I kept it because everybody was saying it was a quote-unquote “great company.” Well, I guess it is a great company, but it was overpriced just the same. I’ve been riding it all the way down, now it’s 55% below the previous high. (2002)
Back to Today: Life in the Fast Lane
The stock market has enjoyed an impressive advance over the past few years, and much of the excitement has come from fast-changing technology that is not so easy to understand. Wall Street is always dazzled by (and wants to sell you) the latest shiny new thing. “AI” – Artificial Intelligence – was the great buzzword throughout 2025, everybody wanted to get into it, and now in 2026 some are now more cautious. The eventual winners in this new industry are not yet known, but AI is surely changing the world, in big ways yet to become clear. In anticipation, breathtaking sums – hundreds of billions of dollars – are being spent building land-gobbling data centers with a ravenous appetite for electricity, a huge speculation with an uncertain future return. How long will it take to earn all those $billions back again?
The Best is Yet to Come
In view of the many great things about America, we all ought to fall on our knees every morning in gratitude for the advantages of living here. The amount of creativity in this country is amazing – unbelievable really. Yet there is a surprising amount of pessimism and negativity around, which holds people back from happy, confident living. Defeatist news articles complain about everything that is wrong, or could be wrong, with our country and with our lives, while the good news seems to get less attention. As a result, even when the economy is strong, many people feel anxious, doubting if they will ever get ahead in their lives.
There’s always a lot that you could worry about, this much is true. But history is littered with innumerable events that were worrisome in real time, but somehow worked themselves out over time. We will have a recession again, but the fact that we made it through all the worries in 2022 without a recession is just one of many testaments to American resilience.
Successful investing springs from a more positive, opportunistic outlook, a conviction that if we put some money aside and make intelligent decisions, tomorrow can be – financially – a lot better than today. Investment involves putting money to work today, in the hope that it will build into more wealth later – sometimes much later, because it takes time for the magic of compounding to work. Sadly, some lack the hope, the conviction, and never begin investing at all.
Countless Americans, and more every day, have prospered over their lifetimes, some in the stock market and some not. They include some of our friends and neighbors. The number of ways in which people make their living is almost beyond imagination. Forbes magazine periodically celebrates the struggles and successes of the more notable ones. Often, they started from nothing, never considering themselves to be financial experts in any way. But they had determination, the discipline to save money, and a general view of America as a fundamentally good place where opportunity may be found. This humble but powerful formula, applied over time with courage and patience, has enabled many a poor man or woman to become financially secure, sometimes truly wealthy. The American Dream shines brightly; success is possible, absolutely. A wise person is the confirmed optimist.
Getting the Next Generation Off to a Good Start
A man we know decided years ago that he wanted his college-age children to learn about money and investing, which wasn’t taught in the schools. There were various ways to approach this. Sitting them down for a long financial lecture probably would not work, for what could be more b-o-r-i-n-g than having to listen to Dad droning on about the stock market? They would soon forget all about it. He settled on a different way of teaching, where they could be more involved.
With a contribution of a few thousand dollars each – which was all he thought he could afford – he opened a small brokerage account in each child’s name, chose one stock, bought shares, and told them about it. At the end of the year, he sent each of them a one-page report showing the cost of the shares and current value, with some brief comments.
The next year he made another contribution and bought a second stock, keeping the first, and at year-end sent them another report. After five or ten years of this, they had accumulated five to ten stocks, and could begin to see how long-term investing can build wealth. The father continued this plan well into his children’s adult lives. Watching their gradually growing portfolios provided some good basic lessons in investing, including these:
- Discipline: To build an investment portfolio – which is like a savings account, only better – you need to save up some money to get started. That takes work, and thrift.
- Patience is an advantage. Even great stocks don’t go up every single year.
- Tenacity: Time is the friend of a good business. It works in your favor as an investor. Hold on.
- The Odds are in Your Favor: Some companies are going to do better than others, and over time the winners grow and dominate your portfolio. The mistakes become less significant.
- Benign Neglect: Often, doing nothing is the best strategy. If you have a portfolio of well-run companies, let them do their thing.
- Diversification: Don’t put all your eggs in one basket.
Dear Old Dad meant well, but he didn’t always pick the most brilliant stocks. There were years when they might have done better to have simply bought an S&P 500 index fund, but in other times the stocks were winners. As a bonus, the children learned about companies and investing. The family stayed with this simple program, adding money, buying more shares, and watching their net worth grow. If somebody else somewhere was doing even better, well, good for them.
Of course, professional investment management is always an option, for those who don’t have the time nor interest level of this father!
Written by George Donner
