Bull markets are born on pessimism They grow on skepticism They mature on optimism They die in euphoria               -Sir John Templeton Value investor Shelby Davis once said, “You make most of your money in a bear market; you just don’t know it at the time.” For those who may not have noticed, we are in a bear market in 2022, so let’s dive just a bit deeper into how to make money in a bear market. So, what has happened so far this year: The S&P 500 fell 23% from the beginning of the year until late June. The market then rallied up dramatically only ..read more

I took a few days off last week for a little getaway. Flying back on Sunday, I was able to read the Wall Street Journal Weekend edition. A cover story in Section C was a review of the trade war between the U.S. and China that kicked off in 2018. The article was interesting:  it brought to mind the bear market of 2018 caused by this trade war. I am sure you will recall the 4th quarter of 2018 when the S&P 500 fell 20%. You do remember this bear market, don’t you?  Fast forward to the pandemic of 2020. The S&P 500 fell 34% in 5 weeks. I am certain you recall this decline. For t ..read more

These events underscore our conviction that the essential challenge to long-term successful equity investing is neither intellectual nor financial, but behavioral; it is how one reacts, or chooses not to react, to market declines that will determine long-term financial success. Less than 60 days ago, we delivered our end of the year newsletter to our clients and friends. The theme of the message was “Act, don’t react.” I invite you to read it by clicking here. In that communication, we identified ourselves as goal-focused, planning-driven equity investors. We stated our belief that ..read more

Long-term successful equity investing is neither intellectual nor financial, but temperamental: it is how one reacts, or chooses not to react, to market declines. As the new year kicks off, I thought it would be helpful to briefly recap our shared investment philosophy (I hope you agree), and then share some comments on where we are today. As always, I welcome your comments and phone calls. GENERAL PRINCIPLES You and I are long-term, goal-focused, plan-driven equity investors. We believe that the key to lifetime success inequity investing is to act continuously on a specific, written plan. Li ..read more

This past Sunday marks a most significant anniversary in the economic and financial history of the United States, and I could not let it pass without comment. When properly appreciated, it can serve as an importantly teachable moment. For it was a quarter century ago, on the night of Thursday, December 5, 1996, that the iconic Federal Reserve chairman Alan Greenspan, speaking at a dinner of the American Enterprise Institute in Washington, gave his instantly legendary “irrational exuberance” speech. And this is what the oracle said. Or more accurately, this is what he asked: “How do we know whe ..read more

There was a little bit of a downturn in the stock market yesterday, around 1.7% if I recall. I really didn’t pay attention too much to the news. So, what of it?  In the few fleeting seconds I was forced to watch a news story yesterday, I heard “plummet”, “collapse” and “plunge”.  That’s all I could recall before I got my hand on the remote and went back to Monday Night Football. A one-day decline of 1.7% along with a 4% decline since September 2 looks an awful lot like the beginnings of an ordinary run of the mill correction – unless it’s not. Therein lies the question we are all (we ..read more

My commute to the office, if you can call it a commute, is about one and a half miles. Total drive time is about 7 to 8 minutes.  Often, I will listen to some smooth jazz or something similar, or just have the windows down and feel a warm breeze. This morning’s ride in was a little different. I cannot explain how, but when I turned on my truck, my satellite radio came on to CNBC and the morning “talking heads.” For some reason, I didn’t instantly change the channel but rather I was lulled into the siren’s song and found myself paying attention to the conversation already in progress. The ..read more

As America continued to recover from the COVID-19 pandemic in the first half of 2021, the economy and the equity markets made significant progress. My midyear report to you is, as always, divided into two parts. First is a brief recap of our shared investment philosophy; second is my perspective on where we are today. As always, I welcome your questions and comments. Guiding Principles You and I are long-term, goal-focused, planning-driven equity investors. We have found that the best course for us is to formulate a financial plan—and to build portfolios—based not on a view of the economy or ..read more

Once in a very great while, there comes a year in the economy and the markets that may serve as a tutorial—in effect, a master class in the principles of successful long-term, goal-focused investing. 2020 was just such a year. On December 31, 2019, the Standard & Poor’s 500-Stock index closed at 3,230.78. This past New Year’s Eve, it closed at 3756.07, some 16.3% higher. With reinvested dividends, the total return of the S&P 500 was about 18.4%. From these bare facts, you might infer that the equity market had, in 2020, quite a good year. As indeed it did. What should be so phenomena ..read more

It goes by many names.  Some call it a “rainy-day fund” or an “emergency fund”; others refer to it as “mattress money”.  Whatever you call it, the function is the same.  It is a buffer of protection against life’s unexpected occurrences.  Think of it as insurance against some sort of unforeseen disaster, such as a pandemic perhaps? “Just in case” seems a fitting name as it is the answer we typically give to our clients when they ask us why they should put aside so much money in cash savings.  This advice may seem hypocritical to the client who has almost certainly been ..read more