The nineteenth stage of America’s Financial Endgame™ is where stable money and prices steer the economy toward a sustained growth path. This is a highly important part of America’s return to prominence in the global economy, because stable money and prices will reward investment in viable businesses and projects, instead of chasing after speculative bubbles.
This is the environment where prudent investors will be rewarded the most handsomely. The reason for this is because money always chases returns. This means that when a market is in a bubble, capital chases after whatever has been “hot” in the bubble. When the bubble ultimately crashes, the market runs away from what was “hot” in the bubble.
The reason why stability in the recovery toward a sustainable economy is important, is because it will reward prudent capital investment. When the market bubbles stop inflating and crashing, the investment capital will stop chasing after “easy money” and flow toward real value. This is ultimately what will be the key to the sustained recovery … as capital flows to value, the result will be sustainable returns that compound over time. This compounding of returns is what will propel the economy forward.
What this means to us as astute investors is that pursuing a strategy of investing in value will be rewarded when America’s Financial Endgame™ unfolds. As the sentiment of business people and investors tilts back toward the fundamentals, the people who have been following the fundamentals all along will realize considerable gains.
This punctuates the fundamental truth that pursuing value is a path to long-term gains. It is certainly true that in any given year, “value” investments may under-perform the market. It is also true that capital chases after recent returns. The combination of these two facts means that value-based investing will fall out of favor while market bubbles are rising. After the bubble crashes, capital will flow based on fundamentals again, and what was once considered a “value” investment will become mainstream.