Performance Report – February 25, 2014

This is a routine report of the portfolio and it measures our performance in 2014.




Details of the overall portfolio for 2014 thus far are as follows:


Portfolio Return                         1.2 % actual (7.4% apr)

Portfolio January 1, 2014                       $180.50 million

Portfolio February 25, 2014                   $182.00 million

Investment earnings 2014                      $2.00 million

Investment Earnings 1981-2014             $126.50 million




            The portfolio is now invested as follows:


January 1, 2013

February 25 2014

Stock Domestic



Stock Foreign






Real Estate






Fixed Bonds

















 Portfolio Comments


         As you can see the % invested in stocks has declined dramatically over the last 14 months. I have now broken it down into two categories – domestic and foreign. As you can see I have found very few opportunities recently in either market.


            The categories “fixed bonds, hedges and cash” are very conservative and, as a group, subject to minimal downside risk and a modest upside. The “hedge” category is attractive (as a cash alternative) in this era of quantitative easing (and 0% interest rates) as it offers a reasonable opportunity to earn more than cash with, in the aggregate, very low risk. I would expect that this cash equivalent option will earn between 1% and 5%.


           As is true for most value investors, I am not making an asset allocation statement by my large cash holdings. I have no ability to predict the near term future, but I can value assets. The cash position is a “default” position and it grows, and it shrinks, with the availability of attractively priced assets.


            The problem with most “value” investors is that they are forced to buy in less than optimal conditions as the mandate from their investors is to own value stocks/bonds. They get punished by withdrawals if they under perform in the short term. Many managers have decided the wiser path is to fail conventionally rather than take the risk of failing, or succeeding, unconventionally. As I have said many times I would rather lose 50% of my clients than lose 50% of my client’s money.


              I am lucky that I have a stable client base who understand the value approach and who, in large part, have been on this journey for a long time and over some difficult market cycles.




         I have decided to slow down the pace of the regular reports unless we experience unusual events. No report will generally mean “operating as usual”.  We are also revamping the website which was long overdue. This has two goals:-


a.      To make it much more user friendly and interactive for our clients. We have new state of the art software (Junxure) which should allow us to provide you a much improved real time experience with the financial planning part of the practice and you will, of course, retain the access to your Fidelity accounts.

b.     The   website will be less accessible to non clients.




            The Fidelity reports have just been issued and there may be revisions as the reporting stock and mutual fund companies amend their statements. Fidelity is required to re-issue their 1099 forms for these and we can access the revisions. You do not need to send any revisions to us as we can access them online. We are completing the tax information in the order in which it is received. If you have not already sent in your tax files, please try to get the forms to us in the next week. For those of you who use accountants, we will send the Schedule B and D forms directly to your accountant when possible.




                   In previous markets that were overpriced there were always sectors that were undervalued but the current market is very unusual in that virtually everything is overvalued and that the dispersion is very narrow. I can guess that this is partly caused by the trend towards index investing and closet indexing. I am very much in favor of this trend for two reasons:-


a.      Indexing is probably the best approach for most investors IF they can avoid the temptation (almost impossible) to sell when things are decimated and buy when things are soaring. This approach won’t make them rich but they will, in the long run, do better than their “do it yourself” friends.

b.     Indexing creates weird distortions in prices and accentuates momentum and trend following. Over the years, I expect to take advantage of the distortions.



           We take the responsibility that you have bestowed upon us VERY seriously. We continue to limit new clients to the children or parents of existing clients as we feel, strongly, that expanding our client base would have a negative effect on our existing clients. We are all in great health and look forward to working with you for many years into the future.


Mike, Nancy and Sheila