This chapter falls outside of the period of Mr. Price's lifetime and is based entirely on the author's and Bob Hall's' speculation as to how Mr. Price and his investment concepts might approach today's markets.

Mr. Price had two distinct advantages over most other investors. He was an innovative visionary and a gifted soothsayer. In addition, he was extremely focused on the business of investing, literally reading reports and studies on that subject from the time he woke up at four in the morning until he went to bed at nine‐thirty in the evening. During his prime, before he retired from the firm, he only took time out from these studies for meals, occasional dinners with good friends, and preparation for and participation in meetings with clients and mutual fund advisory committees.

In the 1930s, he had the vision and foresight to develop the Growth Stock Theory of Investing. Described in more detail in earlier chapters, this was the concept that one might achieve superior investment results with a program based on the commonsense concept of buying and holding only the stocks of companies that had the ability to sustain superior earnings growth over the long term. This was far ahead of his time. In the years immediately following the Great Depression, the emphasis was not on investing for the future, but on the preservation of one's remaining capital.

Even today, many investors put their money into stocks that they believe will quickly go up, rather than in companies that should produce longer‐term superior growth in earnings. “Longer‐term” for Mr. Price typically meant ten years. The time horizon for most current investors is six months or less. Because of this very different focus, there is actually less competition for superior growth stocks today than during much of the past 40 years. Particularly during the seventies, growth stocks became popular, and, hence overpriced, largely due to the firm's widely advertised outstanding success.

Mr. Price also had the rare ability to foresee crucial changes in world sociopolitical and economic trends, and to understand how these changes would impact the investment environment. Typically, his clients would be fully invested years before others recognized that the market environment had changed. In modern‐day financial parlance, he had the ability to foresee the “black swans.” This is a concept, first postulated in Roman times, for rare, significant events. In his 2007 book, The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb discussed how black swans impact the financial markets. He defined a black swan event as “an outlier, as it lies outside the realm of normal expectations…[and] carries an extreme impact.”

Mr. Price demonstrated the amazing ability to anticipate major changes in financial markets consistently over a long period of time. His advice to invest at the end of the bear market, in the blackest days of the 1930s; the forecast to his clients of a bull market beginning in 1942, following the rapid march of German troops through Europe and the equally quick Japanese victories throughout the Pacific; his positioning of his clients' portfolios in 1950 for the greatest business boom in history, while his peers were still concerned about another depression; and his early forecast in 1965 of the ruinous Great Inflation of the 1970s were all black swans.

Bob Hall and I worked for Mr. Price for more than a decade. Bob's excellent investment record is discussed in the foreword. We got together recently to consider how Mr. Price might adjust his investment outlook in the current environment.

He certainly would have a keen insight into prevailing issues, such as the artificial, very low interest rate structure engineered by the Federal Reserve System, the trend today toward national identity, and the liberalizing of Generally Accepted Accounting Principles (GAAP earnings), which make reported earnings virtually meaningless, or take “companies into an alternate reality,” according to a February 24, 2017, article in the Wall Street Journal.

In the dialogue that follows, we will not attempt to match Mr. Price's unique ability to forecast the future. We will merely outline the present social, economic, and political environment, as he defined them in 1937 in his first bulletin, “Change: The Investor's Only Certainty,” and discuss the various currents at work in this environment, as he did every five years or so over his long career. We will probably miss the next black swan, should one be lurking in the reeds.

We do believe, as he did, that it is quite possible to construct an investment program that can produce a superior return over the long term, even without this forecasting. We observed that, in the midst of dramatic change, Mr. Price's own portfolio was always well over half invested in a diversified list of growth companies. By simply following his basic principles of superior investment research, focusing on the quality of a company's management, and carefully analyzing the important financial trends within the company and the industry in which it operates, it has continued to provide highly competitive results for its clients.

The first goal of my meeting with Bob was to review the currents and tides at work in the world and then to develop an investment program for the next or 10 years or so, incorporating any major changes from the forecast outlined in Mr. Price's last article in the December 6, 1982, issue of Forbes titled “Stocks for the Mid‐'80s.”

We both agreed that the major long‐term currents, which Mr. Price had identified in 1937, hadn't changed direction over the centuries – and certainly not over the thirty‐six years since the 1982 article, because they were based on the fundamental nature of mankind. These currents, however, could be substantially modified by the “tide,” as he discussed. There was no question in 1937 that the tide was running in a direction favoring the progressives, toward more government control of the economy. We believe Mr. Price would point out that such tides can and do run their course and eventually change their direction.

“The major force behind the long‐term current towards liberalism,” as he wrote in his 1937 “Change” memo, “was the rise of the masses to power over the past century.” According to Mr. Price, this trend had been propelled by better and faster communications. The telephone exponentially accelerated communications around the turn of the century. The radio followed, with the ability to communicate instantly with millions of people. After World War II, commercial airplanes facilitated travel throughout the world in days instead of weeks or months. Television provided the transmission of pictures in the 1950s, adding a whole new dimension to the power of radio. Suddenly, the average person was able to easily visualize his or her situation and compare it to that of others around the world and see firsthand the impact of major events.

The most important recent innovation in communications has been the Internet, which reached commercial scale after the birth of AOL in 1983. Billions of individuals are now connected every day online, cheaply and easily able to instantaneously communicate their thoughts with pictures and movies, either to individuals or simultaneously to millions of others. The Internet was credited with amplifying the Arab Spring that began in 2011 and, while it is still in an early phase of technical and social development, it will no doubt continue to create more political change around the world.

In 1937, the world's economy had stalled after a very slow recovery from the severe financial collapse during the Great Depression. Real unemployment in the great majority of countries remained at high levels throughout the 1930s. Governments depended on deficit financing to keep up even a modest growth, just as is true today. Socialism was on the rise around the world and there was much political ferment, particularly in Europe.

Mr. Price believed that this rise of the masses, or the “Have Nots,” as he termed named them in the 1930s, was also true of nations. He identified the U.S., Britain, France, and Russia as the “Have” nations, and Germany, Italy, and Japan as “Have Not” nations. Today, the U.S., the EU, and Japan are the obvious major “Have” nations, with China and Russia the major “Have Nots.” China, economically at least, has been rising rapidly in recent decades, allowing its population to achieve a better life. GDP per capita in China, however, is still only $16,000, less than a third that of the U.S. Politically, it remains a socialist republic run by the Communist party. After a brief experiment with U.S.‐style capitalism and open elections, following the collapse of the Berlin Wall in 1989, Russia has become more centrally controlled.

Mr. Price also said that the rise of the masses in a democratic society meant bigger government with increasing regulation of business and more resources allocated to the Have Nots with higher taxes on the wealthy to pay for it. He predicted that as the trend toward socialism gains power in this environment, it will take over more control of those industries that impact basic human needs such as agriculture, transportation, water, heat, and social benefits such as health, education, and insurance. In the last ten years, steps toward universal health care have been introduced, there has been a partial takeover of the funding of college education with the government now controlling the student loan programs, and the attempted regulation of the Internet by the FCC under the old telephone regulations with Net Neutrality, which has been lifted.

Another of Mr. Price's major concerns has always been the depreciation of the dollar through inflation. This has not been a factor for more than ten years, as measured by the Consumer Price Index, but that could change quickly in an improving economy.

Much of the industrial world's economy is currently operating under capacity. In the last decade, China has been an important factor behind the world's economic growth, but China's growth has been decelerating. Each Chinese child will very soon support nearly four grandparents and two parents, as well as his or her own family, due to the impact of the one‐child program. China's production costs are rising, impacting exports. China's total debt load, as a percent of GDP, has surpassed our own level and is still increasing, according to the Bank of International Settlement. The EU is also suffering declining populations, due to declining births, as well as heavy debt loads. The EU debt at the end of 2017 was approximately equal to the U.S., while the Japanese government was saddled with an unpayable total debt load of more then 300 percent of GDP, according to many economists and a December 11, 2017, Forbes article, “When Will Japan's Debt Crisis Implode?”

Due to the inflow of more than one million legal immigrants per year, the U.S. population continues to slowly grow, despite a declining birth rate, but its total debt load, including government and non‐financial corporation debt, has reached a high of 250 percent of GDP. The U.S. budget has only been in balance four years since Mr. Price's death, more than thirty years ago. Government debt has, therefore, increased in most years. In human terms, the U.S. debt of more than $20 trillion is equal to more than $200,000 per household, more than doubling the $150,000 of debt already burdening the average household from a mortgage, credit cards, and educational loans.

The addition of all this debt has helped to keep the industrialized world's economy growing since 2008, but this will eventually reverse as the rate of debt creation declines and, ultimately, as countries are forced to begin repaying it. No nation, as Mr. Price said in “The New Era for Investors,” published April 1970, “can continue to spend more then it earns; it's only a question of time until it catches up to them.” The day of reckoning has been temporarily postponed as the world's central banks dropped interest rates to some of the lowest levels in history. As interest rates eventually return to normal levels, more and more countries, companies, and individuals will find it difficult to afford their debts. As Mr. Price would surely point out, this huge and increasing debt, plus the trillions the Fed and other central banks have generated to keep interest rates low, is a combustible financial mixture. It can be ignited quickly into inflation if the economy accelerates. Like Milton Friedman, Mr. Price believed that inflation is created when money is printed at a rate faster than the growth in the economy, as discussed in Dr. Bernanke's address at the Dallas Federal Reserve Bank on October 14, 2003.

The replacement of the eight years from 2009 to 2016 of increasing taxes, business regulations, and government intervention under President Obama, with a more business‐friendly, growth‐oriented government, will help, and might even temporarily turn the tide, leading to a faster‐growing U.S. economy over the next five years or so. Mr. Price believed that elections could be indicators of change, but do not in and of themselves create change. The fundamental factors of high debt and slow population increase in the industrialized world will continue to impact longer‐term growth.

Given Bob's and my fairly gloomy long‐term outlook, reflecting what we believe would be Mr. Price's views today, an investor nowadays might properly ask whether he or she should buy stocks at all. We believe, as Mr. Price certainly did, that ultimately the investor's best financial protection is the ownership of shares of companies with fine managements, excellent balance sheets, working in fertile fields with projected above‐average growth and a high return on capital.

Mr. Price also felt that it was very important for a new investor in the stock market to perform a careful, honest inventory of his or her own financial condition before actually putting any funds to work. A new investor should create an investment program in writing and stick to it. For example, a relatively young person in her late thirties or early forties with an existing portfolio of stocks containing some capital gains would be fast approaching the high earning years of her career, so she should have excess cash to invest. We will assume that this younger investor has a mortgage, but her other debts are modest, allowing her to build up her investments from her own savings and earnings. If she had accumulated a lot of debt, or if she was older and much closer to retirement, there would need to be more attention paid to capital preservation and current income. A good way to obtain diversification at the outset would be by buying an equal amount of two mutual funds. One would feature high‐quality growth stocks, and the other would offer worldwide equity and fixed income diversification.

For our young client, we would only have a maximum 10 percent actual cash reserve, and we suggest that it be in a fund of short‐term fixed income securities. International diversification would add to its safety. These reserves would be for buying stocks on a large market dip or, most important, to provide some cash for an unforeseen cash emergency.

The investor who would like to build her own stock portfolio, perhaps initially as a supplement to the funds, should reread Chapter 9. She should take a hard look at her own portfolio of stocks to determine if any are true growth stocks. For those that aren't, she ought to set sales prices and get rid of them. It's always better to do selling and buying over a minimum of several months. The investor should identify any large capital gains and spread them out over two years. At current federal and state taxes, it's easy to get a tax hit of 20 percent of the gains. On the other hand, it is always worth biting the bullet and paying the taxes to switch into a superior company with a better outlook, than continuing to hold one over several years with subpar prospects. It's easy to forget that the great fortunes were made by long‐term investors in companies like DuPont, 3M, Merck, and IBM that remained great growth stocks through thick and thin for more than seventy years and rose thirty or more times in value, as described earlier. These are the kinds of premier growth stocks that our investor should ultimately invest in, if she decides to invest some of her money herself. It doesn't take a genius, as Mr. Price pointed out, to buy and hold shares of well‐managed companies in growing industries, which will ultimately produce superior growth in market value – just a little common sense and patience.

But what are the great growth companies of today? For most investors who are working hard in their jobs, or who just don't have the time or inclination to do all the required homework, the best answer is to stick to the above mutual funds and let the experts discover these companies. For those with the time and inclination to begin to manage a portion of their own portfolios, after investing perhaps 60 percent of their assets in mutual funds, and who have absorbed and believe in the lessons of this book, we would suggest that they look carefully at the portfolios of the mutual funds that have won the Morningstar annual awards. An investor might get an idea of which companies these managers believe to be the best growth stocks by examining their top ten holdings. Because these positions are subject to change from actions of the portfolio manager, it would be wise to check in each quarter to see if all of these companies are still on the list.

In managing a portfolio, it is well to remember Mr. Price's advice to gradually take profits, as a company becomes a large percent of a portfolio, and certainly when it becomes excessively overvalued. His goal was to recover his original capital by selling a portion of such holdings as they rise and depositing the funds in a quality income fund mentioned above. He would retain the remaining shares as long as the company remained a growth stock. Bob would politely disagree. He does not sell because of temporary overvaluation. He points out that the best companies do grow faster than the pack. By allowing this to occur without any pruning, the best stocks automatically grow relatively larger, creating faster overall growth for the portfolio. Moreover, there are no capital gains to pay. Having personally experienced, as president of the Growth Stock Fund, the long slow recovery of growth stocks from their overvaluation in the early 1970s, I am probably more in Mr. Price's camp. We leave the reader to make the choice between the two strategies.

To build a retirement account over several decades, an interested investor with extra time might want to become more venturesome. He or she might begin by adding shares of companies that are familiar through a job or from a consumer standpoint, again using the basic concepts for picking growth companies discussed in Chapter 9. Financial data can be obtained online or through a subscription to a service such as Value Line. Managements often speak at investment forums around the country or at annual meetings, where they can be individually questioned. Fortune magazine produces many well‐researched articles that focus on the managements of exciting companies

On the other hand, the investor might decide that sleeping at night is much easier when his or her assets are safely in the hands of professionals, such as those who are successfully running the mutual funds. Several companies today have created “target” funds, which set a target date for retirement or college and manage a portfolio of funds with this specific date in mind. If the investor has accumulated assets of $3 million or more, he or she might consider turning their portfolio over to a professional.