Performance Report – June 10, 2014

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




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


Portfolio Return                         4.0 % actual (9.1% apr)

Portfolio January 1, 2014                       $180.50 million

Portfolio June 10, 2014                          $187.80 million

Investment earnings 2014                      $7.15 million

Investment Earnings 1981-2014             $131.65 million





            The portfolio is now invested as follows:


January 1, 2013

June 10, 2014

Stock Domestic



Stock Foreign



Oil  Resources



Real Estate






Fixed Bonds

















          **** The stock figured is combined for January 1, 2013.


 Portfolio Comments


         I appended the repetitive part of the portfolio comment to the end of this report. It is identical to our comments over the last few months and it is pertinent but, of course, might induce yawns. J


      The portfolio has been steadily advancing throughout the year despite the very small exposure in risk assets (i.e. stocks, oil and non-fixed bonds). The gold sector is also part of risk assets but tends, in the longer term, to move very differently from traditional risk assets.


      Most assets throughout the developed world are fully (or over) priced as a result of the relentless policy of virtually 0% short-term interest rates. The search for yield in this type of environment is ALWAYS dangerous and the danger is particularly acute in 2014.


      I am a value investor and I buy assets when they are cheap on an absolute basis.  As is true for most value investors I know what is cheap, but I have no idea when the cheapness will be resolved by a movement towards fair value. I believe in the short, and the medium, term that the marketplace is unpredictable and that we can only rely on a movement towards an approximation of fair value in the longer term. In short, I believe in a profoundly inefficient market.


      I am encouraged by the, apparently, increased acceptance of the theory of an efficient market and the growth of index investing and the appearance of “robo” advisers espousing index investing. I have always worried about the success of value investing over the years drawing more and more $ into the methodology but, for a variety of wonderful reasons, it has remained less popular than deserved. J


      We continue to be VERY conservatively positioned and this will continue until we start to see attractive opportunities in the marketplace. We do have some positions (GM, Citicorp, Ally, Korea Telecom) but, in general, most things are overpriced so patience is necessary.        





Our cautious approach will continue until we start to see more opportunities in the marketplace. We will continue to search for opportunities throughout the world and we will be, as always, patient.


We are just starting our annual financial planning reviews and you will hear from us in this regard in the coming months. We are also integrating some new “state of the art” software, which should have very positive effects on how we manage all aspects of your financial planning. It is part of our updating of our online presence so that it can provide a secure interactive portal for our clients.


Nancy would have written to you if you needed to make a quarterly tax payment on June 16th.  If you use an accountant, she has also contacted them with the investment income so they can advise you appropriately.


           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 


The same old Comments J


    I wrote the following in the last reports and it is worth repeating:


         “I have found very few opportunities recently in either domestic or foreign markets, although I search continuously. I am extremely patient and conservative and this frequently means that we will have large cash holdings (and/or hedge holdings) for prolonged periods. As I survey the marketplaces most areas seem overpriced or, at best, fully priced. We have had the opportunity to participate in a couple of special situations, both domestically, and as a result of geopolitical turmoil, but in the main, real opportunities are scarce.


         Our definition of opportunity, which is important, is that something is an absolute value rather than a relative value. The latter simply means that something is cheaper than its peers and doesn’t consider whether EVERYTHING is expensive. Absolute value is when something is considerably cheaper than a conservative valuation of its market value in a normal market.


           This too shall pass and we will, as is always true, be able to deploy money when bargains abound and when prices decline substantially. In the interim, patience is the smart approach and is the one we will take on your behalf.


                    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 underperform 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.”