Let’s have some fun! Take a walk down Memory Lane, and see if our advice over the years has been any good!
It’s a challenge going over all the strategic letters we have written to you, our clients, over the past 13 years of dramatic change, and I dare the news media to do the same. If they did, we could see who has been giving you a better picture of what the investment world is really like. If you are on a journey, which we are all in some way, it’s important to find a good map! I’m willing to stack ours up against anyone’s, but I’ll let you be the judge.
What follows is the listing of all the important letters I have written since 1998. They are unedited for content; some are on letterhead, some I had the computer sign for me. I left none out. Listed first is the title of each letter including its date. Following that is a brief description of what we got right and what could have been better “prognosticated.” This is Monday morning quarterbacking at its finest, ten or more years later. While this started out as a growth exercise to improve our systems, it’s turned into a lot of fun, and brought back a lot of memories, some admittedly better than others. The past ten years have seen a lot of change, and probably the next ten years will too.
I think the question you should ask (I would) is, “Do you want us on your side?”
How nice- a “bed-bug” letter, as it’s known in the trade. I include it here for some comic relief.
February 23, 2009 – Captalism
A letter to Tim Geithner, the then-secretary of the treasury offering up another solution to the banking crisis.
The title was based of that country song, “Love got me in here, love will get me out,” but it was lost on Mr. Geithner. In those days, it was all about the government backstopping everything. My solution was for a slightly different arrangement but it fell on deaf ears. We could have done this better by saving the paper, but they answered! See below.
This letter was intended to challenge the reader to get back in the game of life. So many people seemed lost out there; is the world coming to an end or not? I decided to call them on it.
Feb 2009 – What To Do Now
This is a letter about grieving, and lost confidence.
I am not a psychologist and all of the ones I know suggest that it’s a good thing I am not. We felt it was important to point out that a lot of important things have changed, things that people built their self-image on. They need to be reexamined, rebuilt and life goes on.
This letter tells the story of Bernie, as we knew it then. It’s a tale of foolishness on the part of a lot of people, who fell into the trap for the exclusive and back box stories. A lot of the thoughts I had came pretty close to the point; that’s probably the CPA in me.
December 2008 – Sell your bonds.pdf
The government is buying them, let’s sell them to them; they can’t go up.
In the first QE (quantitative easing) the government started out by buying back all the Fannie Maes and Freddy Macs they could get their hands on. This pushed a bunch of money into the banking system (about $600 billion). As we still owned a good slug of them, I wanted to use this opportunity (the government buying them back) as an exit point; given the times, who knows when another big buyer would come along. The letter does a good job of laying out the situation when it comes to longer-term mortgage bonds; a lot of what is says is reality now- dollar, foreign buyers. It turned into an excellent trade around here.
We found a Winner!
This letter looks to tell everyone that the only way they lost anything economically is if they had something to lose. The hidden message is that if you have had it before, you will have it again. It concludes with a great quote my Dad sent up.
It errs in concluding that 2 years is enough time to get back to normal. I did manage to save a few bucks though, by including my required annual privacy mailing along with it!
This letter suggests to our clients that if they had parents, even friends they need to be watching out for them. We were very close to the mark on this concept. One thing we didn’t realize is how much the trouble of the adult children would come back to haunt the parents, like loan guarantees- some real serious issues developed there. Some of the attachments we thought then and do now, just a great review.
Fear and the news media driving it home, again, and again, and again. I believe it’s a central thing that is causing Americans to make poor choices. In this piece I speak of this mess being a credit problem, not a stock market valuation issue. On this I was proven right, as many companies are coming out of this very well indeed, while credit still suffers. We didn’t know the depth of it then; I think that if I missed the boat here, that’s where.
October 2008 – What to do now
A feel good letter when everyone was afraid to turn on their TV’s
It’s important to get a balanced view of things. For nearly everything that happens bad in the economy, there is an offsetting something that will start or contribute to a recovery. That is the nature of economics. As long as people want to work and there is opportunity for them to do so, there is hope. In those dark days, the media was painting such a picture of death that we felt some good news was in order. Most of it worked out as stated. Surprised?
In this open letter to Sec. Paulson, I share my views, and my theory that the dot.com mess actually set the seeds for the mortgage mess, and I gave Mr. Paulson some ideas to restructure the system to get it back on its feet. Funny now, I remember thinking back then that 2 years should be plenty of time for the turnaround. We are still waiting…but some of that wait is political. No answer from Hank; I guess he was busy.
September 2008 – Credit Default Swaps
We are in the soup now- It’s breakfast with Hank every Sunday!
This one tells the story of credit default swaps. We got a lot of compliments on it. It missed, however, in telling the entire story- because we didn’t know it- (probably very few people did) and that’s the impact that the “synthetic credit default swaps” had on this situation. If a regular credit default swap is a bank robber, a synthetic one is Lex Luther.
July 30, 2008 – Old Guy Story
We are trying to get the business moved over to a better place.
This was a well-timed piece to get our assets moved over to TD Ameritrade Institutional to better be able to deal with the turmoil that was happening. Thanks to all who did it then; you have been rewarded. In a couple of months things got moving so quickly that we stopped doing the transfers, as we didn’t want to be out of touch with the trading capability for even a couple of days. A year later, Mutual Service went away and the assets were moved to LPL. In hindsight, we should have had this process completed prior to the mess starting, but had we known how serious it was all to become we would have. Unfortunately, no one did.
June 15, 2007 – Private Equity
We live in a sea of cheap money!
In this letter we describe the situation pretty well. Looking back, we missed the severity of the coming issues, thinking instead that someone (anyone?) in Washington was watching out, and not letting bad stuff into the system. Turns out, it wasn’t the Fed raising interest rates that hurt us, but these little know Credit Default Swaps. Overall, the investment advice was reasonable, although looking back a few years, we could have done better, like “go short on everything, sell your houses!”
April 2007 – Hold Onto Bonds
Hold Onto Bonds
The markets started to get a little choppy with all this easy money around; this letter was to calm our fixed income buyer who saw that the values of their Fannie Maes and Freddy Macs were changing. Sure enough, the bonds paid off; in a few years (2008) we would learn the true value of the “implied government guarantee”. It would be a tough lesson to learn for our country, but our clients did benefit
March 26, 2002 – Providian letter
This was just a specific stock recommendation that did pretty well. We bought a lot of it, and in a few years it would be taken over by Washington Mutual at $20 or so; we enjoyed a nice profit and very nice dividend on that.
This one was trying to put a realistic light on that horrible event. In truth, it was not far off base; there’s a lot of good stuff in this letter. Looking back, I don’t like the feeling I am getting from Paragraph 5, the beginnings of socialism; did that sudden loss give way to the government taking everything over? The stock recommendations were generally spot on. The environment to come was a field day for the regional banks
August 1998 – The dot.com
The dot.com letter
In this letter we discuss the incredible valuations that the tech companies had before, well before they didn’t have them anymore. We got some negative feedback on this letter; people thought I was a pessimist. We could have been more accurate; this letter was written in August of 1998 and that market didn’t top out until spring of 2000. But when it did, wow!
So how did we do?
Send me an email at email@example.com. I would love to know your thoughts.