Write this down. Stocks have not divorced themselves from the fundamentals. Managers have divorced themselves from the old ways of doing things, and their stocks are reflecting those managerial changes.
Take a look at the S&P 500. Do you see what I see? Hundreds of companies that are trying to buy back stock, or printing very little to none of it, other than the cruise [lines] and the airlines, you didn't see much in the way of offerings at all. Why? Because managers know how to do a couple of things. They know how to come up with winning products. They know how to take out costs. They know how to buy back stocks. And they know how to pay dividends.
The structure of taxes in this country heavily favors buying these cash machines. And more and more people seem to realize that the tax advantages of stocks simply won't change much, no matter what you think about the Democrats. The tax advantage of stocks, they're so good that they make it worth owning stocks for those four points I just mentioned. And also, if you don't own stocks, you may be a sucker. That's the sucker position, That's the sucker position, not in stocks like we keep hearing, but out of stocks.
Let's dig deeper: 40%-50% of most stocks in the S&P 500 are owned by index funds. These funds rarely get money taken out because it's how people are taught to save from a very early age. So the brain-dead shareholder base – excuse me – but the brain-dead shareholder base continues to become a bigger and bigger part of companies’ ownership.
On top of that, you have companies with voracious appetites for their own stock because they don't have a lot of growth opportunities. All right. Fair enough. What's left? Not much. So if buyers come in like the new 17 million strong Merry Men of Robinhood and millions of others like them, then there just isn't enough stock to go around. There just isn't. So you blow through levels, blow through levels, blow through levels. Of course, it's more biased up to the upside.
Now, let's say that your company doesn't do the things I just mentioned here. What if you work at a company that is one of the rare losers, even with massive unemployment? Well, the S&P 500 guys kick you out and put in better companies. How do you miss? In that scenario shouldn't we be asking, why isn't the market up even more, given how low interest rates are? Despite the ... selloff in bonds. Isn't that what we have to be thinking about in 2021? It's a scary thought. No one wants to get caught saying it because then it gets played back in YouTube. But I think it's what we have to think about.