Be ready to hear this described as the worst since “the Great Depression”, or “since WWI”, or the “Spanish Influenza”, etc. The vast majority of those lost to the Spanish Flu suffered from secondary bacterial (not viral) respiratory infections, today curable by antibiotics.
On March 9, 2009 investors solely exposed to the S&P 500 would have a 10-year annualized return of negative 4.5% and a cumulative return of negative 37%. Starting March 9, 2009, however, the next 10 years would generate more than 17% per year, with a cumulative return of near 400%.
Investors need to remember why they initially sought a diversified portfolio. It will never be the best performing asset in the world, just as it will never be the worst performing asset in the world. The last recession and subsequent major bear market are key examples of why this is relevant.
The early part of 2018 was characterized by US equity market volatility. What stands out is the contrast with abnormally low volatility last year. The S&P rose over the 12 months of 2017 with a benign economic backdrop. We think true investment risk has probably declined since January as equity valuations are now at more normal levels creating more interesting opportunities.
When you see trade deficit data between the US and China, be aware that the numbers are vastly different depending on the source. China actually follows a more commonly used protocol to account for trade than does the US. For 2016, for example, US data shows a $375 billion trade deficit with China, whereas China shows $276 billion.
The most common financial question that we have been asked over the last six months or so relates to Bitcoin (or any number of other cryptocurrencies). Is it real? How is it valued? Should we invest in it? Can it keep going up in price?
It is important to separate mini-manias from true bubbles. Unfortunately, the difference is mostly the amount of money chasing the folly. Millions and even billions of dollars lost (and thousands of jobs) equate to fads, while trillions of dollars lost (and rampant unemployment and recessions) are bubbles.
Spring is my favorite time of year here in Washington, DC. The weather begins to warm (bringing pleasant memories of spring and summer months long passed), plants and flowers return (especially the cherry blossoms), the grill is awakened from its winter hibernation, baseball begins, and Warren Buffet’s annual letter to Berkshire Hathaway shareholders arrives in the mail.
Part of our early January ritual is to read a number of market and economic projections for the upcoming year. And although they are interesting and (generally) thoughtful, to be frank, the articles are basically all the same…