Category: Quarterly Newsletters

The US stock market gained 452 points from 1229 at the start of 1999 to now. This gain of slightly more than 39% is less than a 3% annualized average gain and combined with dividend payments gave investors an average annual return of 4.09%. The stock market in the US has historically returned closer to 10% with dividends reinvested and for this reason, we contend, these recent returns have been very unattractive to both institutional and individual investors. What have we learned in these last 15 years which can help us to succeed going forward?

Printable Version A journalist from Fortune magazine once asked Andy Grove, the former CEO of Intel, for the best business advice he’d ever been given. Grove provided a simple quote from a former professor at City College of New York: “When everybody knows that something

Downton Abbey is a Masterpiece Theatre show on PBS which has taken US television viewers by storm. It is the story of an aristocratic family in England which perpetuates a dynasty in a small town through the operation of a huge estate. Devotion to this estate and huge family home are accomplished by employing a small army of servants, who maintain the home and the aristocrats. We believe there are strong parallels between what goes on at Downton and what has been going on in the US stock market since 2009. We also see this as a recurring theme for the next 5 to 7 years.

Late in 2008 and in early 2009, a group of what we like to call “brilliant pessimists” hit the airwaves with their economic theories. The prognosticators’ vision of the future was and is predicated on the history of similar situations and the mathematical realities of the huge debt overhang from the prior ten years of profligate economic behavior. They put very effective names on their visions like “new normal” and “seven lean years”. They marketed their visions incredibly well to the point of shaming anyone who might disagree with their theories. Their beliefs quickly became accepted as “well known facts” and filtered into the asset allocation of almost every well researched asset allocation portfolio.