Update - May 26th at 9:00 A.M.
A. Data
The data is as follows:
| Market | Our portfolio | |
| 2008 | -39% | -5% |
| 2009 | +0% | +5.4% |
B. Comments
We are, as noted above, in an enviable position of having, thus far, escaped the devastation that is widespread. Despite the gains of the last month, most people are still faced with severely compromised portfolios and with the need to dramatically modify their lifestyles/retirement plans.
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.
In the past month my selling has increased markedly and we are now invested in the following fashion:
| Stock | 22% |
| Oil | 4% |
| Real Estate | 4% |
| Gold | 4% |
| VR Bonds | 5% |
| Cash | 61% |
| TOTAL | 100% |
|---|
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.
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.
The large cash positions can, and frequently do, change dramatically and they reflect the current dearth of attractive opportunities. The latter are opportunities where the potential rewards dwarf the potential risks and where the worse case scenario is acceptable.
We are now at a very dangerous junction as the economy, under massive stimulation, faces wildly divergent potential outcomes.
Most prospects 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.
- 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.
C. Planning
We have just started producing your financial planning statements and they should all be completed by July. We have also dramatically revamped our web site capabilities (courtesy of my newest employee Alex Crew) and each client will have a dedicated and secure section of the site ,which will include their tax returns, investment policy statements and other useful information. Each will be activated as we send out your individual financial planning statement.
If you have any questions or concerns, please don’t hesitate to call any of us. We are here to help.