“There are 60,000 economists in the US, many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they’d all be millionaires by now. Last time I checked they were all still working.” –Peter Lynch
My only prediction for 2009 is that your prediction is wrong. Yes, that’s right. I predict that your prediction won’t come true.
We love predictions. I can’t figure out why because 99% of the predictions I hear never come to be. About a year ago I was at an event that featured an economic forecast by Brian Wesbury. I like Brian. He’s informative, optimistic about the future, and he’s a great speaker. His speech was loaded with some intriguing economic insight, but the one point I remember more than anything else was his prediction that the Dow would reach 15,000 by the end of 2008. You know the rest of the story.
I left that event with some excitement. Why was I excited? Because I liked Brian’s forecast, and I wanted to believe it was going to happen. Brian is an expert on the economy, and his forecast was exactly what I wanted to happen. The problem: we must learn to EXPECT ANYTHING in spite of what we want to see happen.
I often have people ask me what I think will happen. Their question is usually within the context of a very short time frame (a year or less). I don’t make precise short-term predictions or economic forecasts, because I know I’ll be wrong. Instead, I try to focus on what’s knowable and important. My short term predictions really wouldn’t even matter because our firm has a long-term approach to our investment philosophy.
Apparently I’m not the only one who liked Brian. They have invited him back again this year. I can’t wait to hear his prediciton:)
The end of 2008 is almost here. For many investors that will be a welcoming event. I think it’s safe to say that most investors will be more than happy to put this year behind us.
A year ago, his Value Trust fund had $16.5 billion under management. Now, after losses and redemptions, it has assets of $4.3 billion, according to Morningstar Inc. Value Trust’s investors have lost 58% of their money over the past year, 20 percentage points worse than the decline on the Standard & Poor’s 500 stock index.These losses have wiped away Value Trust’s years of market-beating performance. The fund is now among the worst-performing in its class for the last one-, three-, five- and 10-year periods, according to Morningstar.
- Just because a fund has consistently been a top performer in the past doesn’t mean it will always be a top performer in the future.
- Every great money manager will have a period of underperformance.
- Investor’s who “chased” performance by buying the fund anytime in the past 10 years now have a loss.
- Philosophy – How does the manager approach investing? Try to understand exactly what the manager is looking for in an investment. Spend as much time as you can seeking to understand the manager’s investment criteria.
- Process – How does the manager execute his or her philosophy. What are the steps the manager takes to narrow down the vast universe of investment opportunities? How does the manager identify the most attractive investments to be included in the fund portfolio?
- People – What is the manager’s experience and prior track record? What is the quality of the research team that supports the manager?
I love Thanksgiving. I love the food, and I love the time with family and friends. But, I also love the spirit behind the day…an attitude of gratitude.
- Family & Friends. I have a great family and many wonderful friends! No explanation needed. Everyone knows what a blessing it is to have family and friends.
- Living in the USA. Yes, today our economy is in a recession. Since 1926, we have been through 14 recessions. In all cases, the economy eventually recovered and the stock market went on to reach new highs. Our country is resilient. Freedom, opportunity, and determination have enabled Americans to make our world a better place. I’m glad I get to be part of that.
- An opportunity to buy stocks at cheap prices. The recent crash in the stock market has created an opportunity to buy stocks at levels rarely seen in an investor’s lifetime. If you’re investing for a goal 10 years or more from now, then you don’t want to miss this opportunity. I see some high quality businesses with strong finances where the stock is now trading at value prices.
- Our firm’s new investment strategy, the Global Trends Strategy. This strategy is designed to participate in rising trends and be on the sidelines when there are none. The strategy is working!
- Dividends. When investing in individual stocks we prefer to invest in companies that pay dividends. Dividends are especially nice when stock prices are declining. We have retired clients who are living off their dividends. Although the drop in price for the stocks they own is no fun to watch, it’s the dividends that keep them invested. Without dividend income what would they live on?
- Technology & the Internet. I recently moved to South Carolina. Technology has enabled me to continue to work seamlessly with the team in Ohio and stay in touch with our clients.
- Clients. I wouldn’t have the opportunity to do what I love without our clients. Our firm has many loyal clients who have placed their trust and confidence in us. I am honored to work for every one of them.
- The team of people I get to work with. They are fun to be around and great at what they do.
- The invitation from some new friends to join them at the Clemson vs. South Carolina football game this Saturday. Go Tigers!
- Did I mention family and friends?
On July 1, 2008 our firm launched a new investment strategy, the Global Trends Strategy. The investment approach is simple:
- Identify sustainable trends.
- Invest in those trends via ETFs.
- Adapt quickly when those trends change.
- When unable to identify a sustainable trend, wait in cash.
If you’ve been executing a trend following strategy, then by now you should be in cash and you should stay in cash until new trends are established.