Fourth Quarter Update

October 31, 2020

“If you mix politics with your investment decisions, you’re making a big mistake.”
—Warren Buffett

The coronavirus is still very much with us, as is much of the economic dislocation occasioned by the resulting lockdowns. Granted, we are evidently closing in rapidly on a vaccine—indeed, a number of vaccines. But it may be quite some time yet before most of us will get access to a vaccine, and frustration will likely increase. As well, in the coming weeks the US will go through a hyper-partisan presidential election, with a variety of voting issues we’ve seen few countries deal with before.

So before we’re further engulfed by these multiple unknowns, I want to take a moment to review what we as investors should have learned—or relearned—since the onset of the great market panic that began in February/March. And that ended when the S&P 500 Index regained its pre-crisis highs in mid-August.
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Mid Year Commentary

August 20, 2020

I’ve summarized my thoughts on the first half of this year and where we are at this point.

  • At midyear, the best that can be said is that the first great wave of the pandemic appears to be flattening, and the economy is slowly reopening. As it continues to reopen, there will inevitably be some flare up in new infections. The interaction between the pandemic and the economy in the short to intermediate term is therefore perfectly impossible to forecast.
  • The equity market crashed from a new all-time high on February 19 to a bear market low (so far) on March 23, down 34% in 33 days. There is no historical precedent for this steep a decline in so little time. Unpredictably, it then posted its best 50 days in history and does appear to be on a path to recovery.

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Diversification is a Drag on any Portfolio

June 24, 2020

A prudent investment approach when constructing a portfolio is to include assets that are un-correlated (don’t always move in the same way) Assuming all assets provide positive returns over time, including “diversified” assets in a portfolio should even out returns over time – (higher lows and lower highs) but it does mean that some investments won’t be “working” at any one point it time. Over the short term this can mean underperformance when comparing returns to certain indexes. Ben Carlson’s article on this covers the last five decades and how different asset classes performed.

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