Whatever happens with Covid-19 and how we ultimately deal with it, be it a vaccine or medication or a change in behavior, we will adapt individually and together as a society.
A 45 Year History of One Family’s Success
Investment results are easily measured on an absolute basis. Because they are so easily measured, academics, financial advisors, asset allocators, consultants, individuals and a host of others have devoted a lifetime to scrutinizing the results of others.
Many times over the past twenty years we have discussed our mentors, those great investors who have influenced our thoughts, opinions, methods, techniques, stock selection and portfolio construction. We’ve shared the words and writings of Benjamin Graham, John Templeton, Marty Whitman, Bernard Baruch, Philip Fisher and so many others who deserve our thanks.
It seems that we are at a point in time where a large portion of investors believe that machines can replace human intelligence in the field of portfolio management, resulting in higher risk adjusted returns at a substantially lower cost.
There have been many new approaches to portfolio management. As all professional advisors should, I take the time to explore these new approaches. Yet it seems that each new approach is simply a minor change to the long standing acceptance that risk is the volatility of current asset prices.
Alma Volker scribbled the note, quoted above, in the margin of a 1911 economics textbook, Outlines of Economics, written by Vassar College Professor Herbert Elmer Mills. Later her son, Paul Volker, who has served six presidents over his long career in public service, shared his regret of never discussing economics with his Mom in his recent book Keeping At It.
Old Big Red sprung a leak a while back. Many of you are familiar with Big Red, but there are a few of you who might need an introduction. Big Red is my 18-year-old Chevy Silverado 2500 HD. I realize this may not be the type of vehicle driven by the majority of bankers, money managers, financial advisors, or brokers...
In today’s world, where politics take up the majority of news cycles and there is an ongoing war of words between the two major political parties, I decided for this letter to replace our often used phrase “conservative investor” with “cautious investor.
The boring truth of financial analysis and portfolio management is that the majority of our days are spent visiting with clients, reading, reading, reading, and when required, making decisions. Years ago it would have included quite a bit of time on a calculator, but thanks to the low cost of computers and software, most of the number crunching can now be completed with the push of button.
What we can learn about the current state of our economy by traveling and visiting with others outside of our home turf is amazing. For many of us in the investment business, our view of the economy is easily warped by statistical reports and interpretations prepared by professional economists.
From the time I was a little tyke, I knew the benefits of having cash available to make a purchase. With it I could easily buy something under very favorable terms when others were in desperate need of that cash.
We have all been taught to “play by the rules” since the very beginning of our lives. Our parents did the best they could to teach us rules of proper behavior. That list of rules continued to grow longer the older we got, governing our day to day interactions with others.
In one of our meetings, Justin asked a question of me. He said, “Why is it that the only investment managers telling people to be careful are old timers like you? Jeremy Grantham of GMO, whose seven year forecast is negative in all asset classes other than emerging markets. Howard Marks, whose most recent memo “There They Go Again…Again” strongly suggests people be cautious in their investing today.
Most of us believe that experience in an occupation, measured by time spent on the job, leads to higher productivity for the employer and greater income for the employee. I agree that this belief holds true for most occupations.
Our lives often seem to be dominated by numbers. Social Security numbers, drivers’ license numbers, account numbers… an unlimited number of 0’s and 1’s residing in thousands of databases, many of which are designed to keep track of our every move. Most of these numbers used to identify us are not necessarily wanted.
The CFA Institute’s second quarter 2017 Financial Analysts Journal included a research article penned by Martijn Cremers, professor of finance at the University of Notre Dame, entitled “Active Share and the Three Pillars of Active Management: Skill, Conviction, and Opportunity.”
The vast majority of businesses manage their operations according to a plan. That plan may be as simple as an entrepreneur writing down a few goals on a napkin, or as complex as a massive set of instructions covering the day to day, month to month, year by year, or decade by decade actions required to maximize profits.
Now that I am an honored member of the “gray-beard club” of investment managers, I can reminisce fondly back to the time when I first entered this business and began learning my trade with the utmost confidence of the “cute, fuzzy, teddy bear” youngster I was.
One of the greatest strengths of American capitalism is how it addresses the problems faced by its citizens. The greater the problem, and the more lives impacted by the problem, the more entrepreneurs, academics and government officials there are seeking solutions.
Three decades ago Sir John Templeton provided 22 rules for investment success to William Proctor who then shared these rules in his book, The Templeton Touch. Templeton’s first rule was: “For all long-term investors, there is only one objective – maximum total real return after taxes.”
We all know that our government and its agencies are very good at reacting to a real or perceived crisis with new laws and regulations designed to reduce the chances of another similar event occurring. The most recent example of this concerns the cost and availability of health care.
