A very happy Christmas to all loyal readers of the Badger’s blog (so that’s both of you).
I’ve recently returned from a trip to the US which included a stop in Atlanta.
He had a dream
Famous for being the home of Coca Cola and probably the most ill-judged siting of a modern Olympic Games, its real gem is the Centre for Human Rights which documents the struggles of the Black community in Southern America culminating in the protest marches of the 1960s.
The central figure, Dr Martin Luther King Jnr was born and lived in Atlanta, and I visited his memorial and the church where he preached.
Inspired by Gandhi he spent time in India studying the non-violent resistance campaign against British occupation which he then utilised to lead mass passive protests such as those at Selma, Albany and the march on Washington.
If one has never heard Dr King’s speech at the Washington monument it is similar in clarity and poetic power to Lincoln’s Gettysburg address. Both were indeed giants among men and both were sadly assassinated at the height of their powers (these good men indeed died too young).
This doesn’t have anything to do with the blog but I thought it was interesting!
Markets
After the heavy turbulence experienced in August and September markets have recovered lost ground in October and November.
Europe is up for the year with France and Italy being strong whilst the US is now broadly flat for 2015.
The FTSE 100 is down year to date primarily due the high weighting of mega cap miners, these shares suffering mightily as commodity prices have steadily declined.
The outlook for the commodity complex continues to look weak for 2016 with the dollar likely to strengthen when their interest rate rises, and China’s growth remains sub-par.
This will impact the commodity producing countries such as Australia, Canada, Saudi Arabia and Russia who previously enjoyed booming exports and economies from 2009 – 13.
Australia and Canada until recently had strong currencies and booming property markets, neither is likely in 2016.
What are we doing?
George has been hard at work reviewing all funds within portfolios and we have identified both those which we think may be replaced / reduced and high quality potential alternatives.
We will schedule meetings for early 2016 with fund managers to fully update our understanding of both those we currently hold and those we may add.
The portfolios are all showing positive returns for 2015 and are beating their benchmarks. For those who missed George’s post on this subject we have altered the benchmark construction to increase its performance level because we want it to be a challenging hurdle to clear (we were so far ahead of it previously we felt it looked unreal, although it was an absolutely fair comparison).
Although we keep saying this it does bear repeating; we judge ourselves and ask you to evaluate us by how the portfolios perform against market performance (benchmark) not by how much the funds increase.
The average growth of equity markets historically is roughly 7% pa over a cycle with property and bonds 2-3% lower. Some years will be good for markets, most will be just ok and there will be the occasional shocker; that’s just the reality of how it has always been and likely always will be.
If we can outperform the benchmark by 2-3% annually this will compound into significant excess gains over time. This means being +3% in a flat year, is as good as +15% when the benchmark is up 12%.
These are actually equally good performances in percentage terms but they don’t feel the same obviously.
This is another of the contra-intuitive elements to investing that makes the practice so challenging and interesting for us to understand and a bit tedious for blog followers to read about!
Note: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.