“We do not have, never have had, and never will have an opinion about where the stock market, interest rates or busi­ness activity will be a year from now.”

—Warren E. Buffett, the world’s most admired, least imitated investor, in his annual letter to shareholders 30 years ago this month, dated February 28, 1989

Note:

  • On February 28, 1989, the Standard & Poor’s 500-Stock Index closed at 288.26. On December 31, 2018 it closed at 2,507, fairly close to nine times where it was on the day of Buffett’s letter. Of course, this ignores dividends.
  • The cash dividend of the S&P 500 for the full year 1989 was $11.73. For the full year 2018, it was $53.61, a bit more than four and a half times where it was in 1989.
  • To get a sense of how these increases compare to inflation, note that the Con­sumer Price Index stood at 122 in February 1989. In December 2018 it was 253, having slightly more than doubled in the interim.

When will we ever learn?

It was never about “timing the market.” It is always about TIME IN THE MARKET.

That is a quote from one of the resources I follow, and it echoes my sediments. I have said for a very long time that equities out pace inflation by a wide margin, you just have to be patient. For a person that retires at 65 or so, he/she could have 30 or more years to live off their resources instead of their income. So, the 4Q2018 unpleasantness was followed by a pretty good January. Not sure what’s to follow but we continue to maintain our investment strategy.

I know this sounds like ground hog day every week, but I want to keep repeating what our portfolio managers are doing that is a totally unique and a one of a kind investment strategy. One factor is a built-in strategy for a yearly cash flow, in addition to dividends, interest and market returns. In a rising market, the portfolio values tend to go up more than just the market returns. Another ingredient included is that, in the event of a sudden and dramatic drop like 9/11, the portfolios are designed to recover most, if not all, the losses. The only drawback is that, if the markets trend down, these portfolios will underperform market returns as we saw in the 4th quarter of 2018. (There is no free lunch) And, please always remember there are no guarantees when it comes to investing in the equity markets and investing does have risks.

With the partial government shutdown now on pause, tax season is upon us. Hopefully the attached article will be helpful. And for those of us that fail to do today what we can put off until tomorrow, tomorrow is here for Super Bowl LIII. I’m sending this out on Sunday morning rather that Monday so us procrastinators have something to fall back on. Hope you have a super day. As always, should you wish to talk with or meet with me, just email or call. Now, let’s all make it a great week!

Doug Alden

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