From Blessed to Fail to Doomed to Succeed

William Smead
Chief Executive Officer
Chief Investment Officer





Dear Clients and Prospective Clients:

 
Today, an owner of good quality United States based common stocks is doomed to succeed over the next ten years. They are doomed because of this psychologically difficult environment’s affect on stock prices. Stocks are low. Prices compared to earnings are low. Yesterday there were 1978 New York Stock Exchange listed stocks that made a 52-week low. A big number for a single trading day over the last ten years was 600. We are lonely optimists. Jim Cramer, who has been pushing momentum stocks on T.V. for years, is telling people to sell the very same stocks he touted a year ago. Buy low, own low and hold a long time has always succeeded in the past.

We believe we will succeed over the next ten years because the quality and financial strength of our companies leads them to survival and survival leads to prosperity. The number one damager of long-term profitability is competition. How many new drug companies are being funded by the IPO’s of Common Stock? How many phone and cable companies? How many brand-name retailers are appearing on the seen? How many new asset custodians and money managers? How many software or technology consulting firms are debuting? The answer is nearly zero and in fact the opposite is happening! Our companies are seeing their competitors decline or disappear in direct industry competition and investment alternatives are dropping like flies. How about those hot commodities and commodity-related stocks? How about those emerging international stock markets? How about those glamour tech stocks?

Is the population of the world shrinking? In the U.S. we are delivering the most babies (4.3 million last year) since the height of the baby boom in 1957. China and India should create massive new markets for pharmaceuticals, entertainment, software, consulting and money management/custodianship. More customers and fewer competitors, sounds like a dream come true.

History is on our side! U.S. investors were doomed to succeed in 1932, 1942, 1974, 1982 and 1990. They were blessed to fail in 1929, 1966 and 1999.

We have no idea when this panic hits bottom. However, if you can survive this, we believe you are doomed to succeed!

Warmest regards,

William Smead

 

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