Category

Market Commentary

2020 q1

2020 1st Quarter Commentary: “Poorly Drawn Corollaries”

Market Commentary
There is no way to cover everything in one letter. There never is. Many of you have likely read enough about coronavirus at this point to exercise every last rational and irrational fear you already harbored. Instead, we want to provide context on the situation while also highlighting where common parallels fail. In this letter: A rush for the exits drains liquidity from most equity and fixed income markets resulting in a rapid and significant sell-off that rivals some of the worst we have witnessed in the past 100 years. A global pandemic ends one of the longest economic recoveries…
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2019 q4 commentary

2019 4th Quarter Commentary: “Farsighted Expectations”

Market Commentary
The last time a balanced 50% stock/50% bond portfolio performed better than in 2019 was back in 1997 Market observers have a mixed track record on short-term (1 year) predictions but much better on a longer term (10+ years) Those longer-term market projections suggest more tepid performance for a balanced portfolio over the next decade than what was enjoyed over the most recent 10 years and especially over the last year Politics can lead to sub-optimal decision making – make portfolio changes, if desired or needed, because of your financial circumstances and where you are versus your financial goals; we…
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recession

2019 3rd Quarter Commentary: “The Recession is Coming! The Recession is Coming! What is a Recession Anyway?”

Market Commentary
One of our least favorite things about investing is the remarkable imprecision of language. There are so many terms like "risk," "momentum," "smart beta", and "asset class" (among many others) that have no precise definition-- and yet, everyone assumes they know what those terms mean. We were thinking about this recurrent complaint while being barraged with articles and narratives about the inevitable coming "recession." While we don't want to seem callous, our concern is with the effect of a "recession" on portfolio returns, not the actual economic effects. Assuming the next "recession" is more of the garden variety and not…
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2019 2nd Quarter Commentary: “From Fear to FOMO”

Market Commentary
It was just over six months ago that we penned a piece about the then market sell-off, cautioning against knee-jerk reactions to short-term headlines such as “Worst December Since 1937” amongst others. Well, it did not take long. At 4:01 ET on Friday, June 28, a headline flashed across the Bloomberg terminal: “S&P 500 Has Best First Half of Year Since 1997.” This time around, we again urge calm, in this case against the fear of missing out, or FOMO. We often write about why we choose to be strategic investors, and will not rehash it all here, but there…
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2019 1st Quarter Commentary: “When Hindsight Isn’t 20/20”

Market Commentary
“Before, You Are Wise; After, You Are Wise. In Between, You Are Otherwise.” -David Zindell Most of us are attracted to round numbers.  Attentions peak around calendar years and familiar anniversaries that have meaning beyond the numbers themselves.  Rarely do we celebrate someone being at a company for 28.14 years or ask about performance over the last 3,147 days, but we do celebrate 20-year reunions and the beginning of a new century.  So, for a society fond of round numbers, the opportunity arrived in early March to count and reflect.  Ten.  In our experience, ten is the number kids get…
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investment letter

2019 Q1 Investment Letter

Market Commentary
Markets rebounded sharply from their 4th Quarter 2018 swoon. A balanced equity/fixed income investor is now flat or slightly positive for the two quarters from September 1, 2018 through March 31, 2019. Most major asset classes and strategies posted strong 1st Q 2019 performance. The US survived the longest Federal government shutdown in history in January, trade negotiations with China do not appear to be getting worse, different UK constituents seem to be unable to get on the same page negotiating with the EU regarding Brexit. Three months ago, investment headlines cried “December was the worst December since 1931.” Well,…
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quarter recap

2018 4th Quarter Review: “Holidays, Goldilocks, Resolutions and Strolling Along the Laffer Curve”

Market Commentary
In the grand scheme of things, this holiday season was probably no different from those of the past. Like many others, my family went through some combination of joy, distress, kindness, alienation, reconciliation and everything in between (sometimes all in a matter of minutes). Ultimately, the kids were happy to be out of school and together with the family, and although they occasionally fought and complained, there were still glimpses of heartwarming Rockwellian moments. On the other end of the spectrum, the adult dinner conversations were probably more Orwellian in nature, highlighting how polarized any discussion can become. The topics…
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investment letter

2018 Year-End Investment Letter

Market Commentary
Few asset classes were positive in 2018 – the one “bright” spot among the asset classes we allocate to was Municipal Bonds, up .50% to 1.25% in 2018 depending on the strategy Equity and fixed income markets now offer more attractive valuations – the S&P 500 P/E is now at a reasonable 16.5x (lowest since 2014) after peaking at 23x earlier in 2018; fixed income yields are off the November highs  still materially higher than this time last year The underlying economy looks OK to good – corporate earnings were up over 20% in 2018, banks are lending and have…
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investments note

2018 Q3 Investments Note

Market Commentary
Third quarter 2018 saw US equities continue their upward march. At +7.65% the S&P 500 had its best quarterly gain since Q4 2013. Large Cap US equities are now up more than 10% YTD. The difference between US equities and our typical portfolios is explained by the fact that international equities, fixed income, and alternatives are all negative YTD. While we of course always want all of our investments to do well, that is unreasonable for a diversified portfolio. Looking at each of these negative asset classes in more detail, the performance of our managers is consistent with their respective…
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diversified portfolio

2018 3rd Quarter Review: “The Taming of the Diversified Portfolio”

Market Commentary
The concept we discuss here goes back to before the advent of the written word, living in parables echoed in religious and secular texts alike.  The precise wording has evolved, but the message has not changed materially over time.  Cervantes put it on paper more than 400 years ago through the lips of Sancho Panza, and we still use a translated version of it to teach our kids: “It is the part of a wise man to keep himself to-day for to-morrow, and not to venture all his eggs in one basket.” To be more succinct, diversify.  Investors have leaned…
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