Sales Desk – US 877.701.2883
Sales Desk – International +353 1 525 9677
Sales Desk – US 877.701.2883
Sales Desk – International +353 1 525 9677
Warren Buffett describes the stock market’s purpose as being “a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”. We are reminded of this by a series of news reports and commentaries on subjects greatly influenced by basic economics. In today’s missive, we consider what the law of supply and demand says about China, oil, and housing in the USA.
The wealth management and institutional consulting communities have allowed indexing to be called “passive” investing and stock-picking disciplines to be called “active” management. This implies a mindless approach to indexing and a great deal of busyness to stock picking. A number of recent articles and commentaries have been written which question the viability of stock-picking disciplines in an era of numerous indexing choices and ETF vehicles. We at Smead Capital Management believe these labels are at the heart of a great deal of confusion about what works and what doesn’t work in both equity mutual funds and separately managed accounts.
As long-duration common stock owners, we at Smead Capital Management don’t put much emphasis on predicting the year-to-year movements in the stock market. We expect at least a 10 percent or greater decline during each year and a greater than 20 percent decline at least once every five years. With that caveat in place, we will throw our two cents into the debate about what the US stock market will do in 2013.
We at Smead Capital Management believe that prolonged faith in China’s economy and the belief that emerging market growth will be an elixir for developed market multi-national companies is the erroneous gift that just keeps giving. If China’s economy has been successfully soft landed from its boom, why is the internal Shanghai Composite index making new lows as recently as last week (November 29th, 2012)? From its peak on October 16, 2007 through December 3, 2012, the Shanghai Composite is down over 64.8%, whereas the S&P 500 is up 2.7% on a total return basis. We at Smead Capital believe that China’s boom and the boom in commodity prices which it undergirded do not pass the smell test!
A tremendous amount of energy and effort has been expended in the US on behalf of wealthy investors to secure returns while reducing risk. Like any useful endeavor, it started out as a wise thing and reached its stride in the late 1990’s as a way to deal with a massive asset misallocation. As Warren Buffett always says, “What the wise man does at the beginning, the fool does at the end”. It appears to us that the efforts to eliminate risk in the US capital markets have reach the “foolish” point.
As we approach the end of 2012, those of us at Smead Capital Management are struck by how helpful the band, The Who, could be to those who are interested in relative performance. Their comments on demographics, psychology and relative value are as beneficial to the contrarian investor today as they were 40 years ago when their songs were first popularized.
William Smead Chief Executive Officer Chief Investment Officer Dear Fellow Investors: The Bible is full of stories of God’s people living in exile on their own volition. A famine occurred in the land of “milk and honey”, so the Hebrews moved to Egypt at the
William Smead Chief Executive Officer Chief Investment Officer Dear Fellow Investors: We spoke to two small groups in Spokane on September 21st, 2012. For better or worse, when I think of Spokane I think of my cousin Gary. It was 1981 and yours truly was
William Smead Chief Executive Officer Chief Investment Officer Dear Fellow Investors: In an article published by Marketwatch.com on September 21, 2012, Mark Hulbert asks the question, “Where do you think the stock market will be ten years from now?” It was as a lead into
William Smead Chief Executive Officer Chief Investment Officer Dear Fellow Investors: Ten-Year US Treasury Yield since 1/1/1871 My career started as a stock brokerage trainee at Drexel Burnham Lambert in 1980. As you can see in the chart above, interest rates at that time were
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