Do You Know The Muffin Man?

There are now robots roaming the streets of Austin, and cities around the world, delivering food.

Why do they deliver food? Because they don't make food. They made a deal with the chefs, who want to focus on cooking.

This is one of the beauties of business and entrepreneurialism — slot in where you can. Find a societal need, and build a product to solve that need. Food delivery? Great.

But HARK, says the muffin man. He too, once had a distribution deal with the chefs (these chefs were bakers, who made muffins that were more like what we'd call biscuits...and muffin men would deliver them).

200 years laters, some of the most futuristic-looking technology isn't solving new problems at all. It's simply replacing tasks that humans have done for a long time...food delivery, driving, surgery, etc.

Eventually, robotic delivery will be reliable and predictable, and very few humans will deliver food. Or drive. Or perform surgery alone. That is where we are going.

The muffin man evolves. The muffin man then IS the food-delivery robot now.

They reflect innovation, emblems of change — and investors should remember that 200 years ago, the muffin man did not imagine the robot. Just as we cannot know what will deliver food in 200 years from now.

At this pace of innovation, we frankly don't know what will deliver food in 20 years. More importantly as investors, we don't know what companies will profit from the innovation, or where they will be headquartered.

Do you really want to guess at the expense of possibly being completely wrong? There are over 8 billion people in the world across 195 countries. Who will kill the robot? Who knows.

Historically, very few stocks do well. Despite the broad market having a meaningfully positive return long term average, 96% of stocks collectively perform the same or worse as short term, risk-free bonds. The market is pulled upward to a long-term positive average only because a small handful of stocks have delivered ungodly, skewed returns. There is no reason to expect it to be any different in the future.

Why guess which companies? Why guess which countries?

Since Trump was inaugurated, U.S. stocks have struggled as stocks outside the U.S. have flourished.

And look at some specific countries:

Poland. Greece. China. Spain. Germany. Austria. These are returns for two months!

For over a decade, U.S. stocks have ripped higher relative to most of its peers. But nothing is guaranteed. Humans will continue to innovate, and certain political and economic regimes will be more conducive to stock market booms than others. But I do not know which ones. And neither do you.

I also do not know if Trump may end up being great for stocks this term. It is possible. Can't know.

The U.S. stock market is about 65% of the total global market. There's information in that. I don't want my clients to own meaningfully more OR less than that. That's the footprint. Add up all the stocks, and that's the price of the USA market within in the global market. 65% is the thumb-mark.

There are so many smart, informed investors trading stocks every day. Every second of every trading day, there is equilibrium at the current price — smart people trying to buy, smart people trying to sell.

I'm not going to tell them that they're wrong by making major deviations from the market weightings. We can't know how the future unravels. So 65% is where I start when I design portfolios.

Do you know the muffin man? Today, yes. Tomorrow, no.

It's an extraordinarily outsized risk to keep most or all of your money in a single country. Humans will continue to be profit-motivated and innovate. I expect the broad market to move higher over time. I want to own stocks.

I just don't want to guess what future muffin men look like, or where they come from.

End.