Update - May 8th at 9:00 A.M.
A lot has happened since the last report was issued on March 30th.
The data is as follows:
| Market | Our portfolio | |
|---|---|---|
| 2008 | -39% | -5% |
| 2009 | +3.8% | +3.8% |
This would now be worth $63,300 if it had been invested in the broad market. It would need an additional gain of 57% to reach breakeven.
A similar sum invested in our portfolio would now be worth $98,600. It would need an additional gain of 1.5% to reach breakeven.
I tend to use the broad market as my benchmark as it is, through time, the best performing asset class (i.e. it is a tough benchmark).
As I noted before, although we invest as always with a strict adherence to our basic value principles, we have also adapted to the new, schizophrenic, environment. Our holding periods are often short as valuation changes that used to take a year seem to occur in a matter of days.
A variety of factors have created the current environment of wild swings, including hope and despair and irrationalities that abound in all sectors of the market. It is full in equal parts of opportunity and extreme danger and uncertainty. We will continue to be cautious as we navigate these tricky waters.
We will continue to be extremely risk averse and to focus on the avoidance of permanent capital loss. This does NOT mean that the portfolio will be free of fluctuations and, in fact, we hope it isn't, as fluctuations provide opportunities.
In the past month my selling has increased markedly and we are now invested in the following fashion:
| Stock | 26% |
| Oil | 5% |
| Real Estate | 3% |
| Gold | 4% |
| VR Bonds | 5% |
| Cash | 57% |
| Total | 100% |
Based on my experiences over the last year, the only thing I can be sure of is that these allocations will change dramatically in the months ahead.
In February and March, I found many things of interest, but now the flood of opportunities has turned into a sluggish stream. Most opportunities that I review offer reasonable, but not extraordinary, opportunities and more risk than I deem prudent. So, as always, I continue to search patiently for smart ways for us to invest our hard earned funds.
To summarize:
- We will remain calm.
- Expect portfolio fluctuations. They are a normal part of the process. I usually respond to declines by making additional purchases.
- Our basic value methodology is unchanged.
- Unlike Bernie Madoff, we do not have custody of your funds so we can't abscond with your money.
- Our own money is invested, in its entirety, in exactly the same fashion as the portfolio.
- I have no predictions for the future except the rather obvious one that it will continue to be extremely challenging.