Category: Quarterly Newsletters

The Federal Reserve Board reported its most recent Z-1 on household assets. It revealed that households directly own 27% of their assets in common stock and indirectly own 13% through funds/ETFs/401ks. They also have 14% of their household assets in defined benefit programs, which are currently 50% invested in common stocks. Add it all up, and you get 47% of household assets held directly and indirectly in common stock. […]

As the investors of the strategy look back at the first half of 2024, we believe it is important to understand where we sit and what our edge as investors is. With the barrage of news and noise today, we want to focus in on how we can take advantage of the markets. […]

There are four main educational disciplines that are important to us in the investment process. We believe investors need to understand economics, the history of the stock market, the mathematics of investing and the psychology of investing. At the end of the first quarter of 2024, we’d like to expound on the psychology of today’s U.S. stock market. […]

As we finish the first quarter of 2024 and look ahead, global stock investors are looking for lower short-term rates from central banks. The question remains whether they will get them. Looking back since the beginning of the pandemic, the Federal Reserve Board and its Fed futures market have been bad predictors of central bank policy. This debate has been better served in the psychological or intellectual realm. In this letter, we would like to explain part of the reason why we think it will be tougher to tackle inflation and why we have to deal with Higher Natural Rates. […]

As we end 2023, the world looks very different than it did a few years ago. The one thing inevitable in life is change. As investors, we are required to spend a lifetime of learning. One of the things we should recognize over time is how to take advantage of change. In this shareholder letter, we hope to explain current phenomena that weren’t predicted or present just a few years ago. We hope that reminding ourselves of this will bring more clarity to the opportunities for investors ahead. […]

[…] If there was a Coast Guard for the U.S. stock market, we believe they would be issuing a warning to owners of the S&P 500 Index and popular common stocks. Let us share the data that the stock market Coast Guard would use to urge caution. […]

The strangest thing transpiring in the first nine months of 2023 is the level of short and long-term rates versus the long-term optimism of passive US stock market owners. As we write this, the 30-year Treasury is hitting 5% and US stock investors have not gone into a general panic. The bond market is feeling very uncomfortable, but bonds lose with inflation, right? […]

If you are a regular reader or have met with us in the last couple of years, you are aware that we have a very dour view of how the US stock market will be impacted by the unwinding of the financial euphoria episode which initially peaked in late 2021. […]

In Warren Buffett’s 1999 Allen and Co. talk in Sun Valley, Idaho, he argued that the stock market has historically had what he called a “Biblical kind of symmetry!” As we come to the end of the stock market’s second quarter of 2023, we will ask the following question: Is the U.S. stock market bumping up against natural and historical limits? […]

One of the strangest things we have seen among investors is the willingness of older retirees in today’s stock market. On July 6, 2023, Anne Tergesen wrote an article in The Wall Street Journal on this exact subject titled “Older Americans Invest Like 30-Year-Olds”. She opens the article by writing, “Older Americans keep rolling the dice in the stock market, ignoring the conventional wisdom to protect their nest eggs by shifting more of their investments to bonds.” Retired investors were practicing this because, until more recently, they were receiving poor income from the bond market. They also feared what inflation could do to bonds. […]