August Market Review-2015- “Great Balls of Fire”
Over the past 4-5 weeks, I have heard from many private clients in terms of their uneasiness with the whipsaw volatility of the current stock market. Honestly, I don’t blame them one little bit. There are many exogenous events in the world that seem to directly affect our wallets. More importantly, these events are happening on the back of an economy that hasn’t seen a wage hike since 2007, and a government who has abdicated America’s role in the world. These are scary times indeed.
All that having been said, my wonderful father, Mr. Alex. G. Campbell, Jr., the real A.G. Campbell for whom our firm is named, taught me several very important tenants about the market over the past 30 years. The following points are excerpts from listening to him and his friend Mr. Brodie speak, or our conversations. The one truly remarkable thing about the philosophy of how my father invested his capital is that he seemingly was never worried. Contrast that calm demeanor with every “Breaking News Alert” from CNBC, CNN, or FOX NEWS, and I believe that my father didn’t simply establish a better way to live his life. For lack of a better metaphor, he discovered a checklist. Once he had done his homework and the prospective investment had met the criteria, he bought the company and put it away for the next 20 years. An advantage of those days was no 24 hour news cycle. I believe our insatiable appetite to stay up to the minute and “connected” causes our society more ills than you can imagine. Many of my friends find themselves suffering from depression, insomnia, tenuous marital relationships, endless ADD medication, and the like. It’s sad really, but dad used some good common sense and intelligence to ascertain all he needed. The following represents some of his philosophy:
- · Dad always encouraged us as children to put away at least 10% of what you earned or received as a gift. That advice set me up for following the same prescription with my retirement plan.
- · Pay your creditors on time and don’t borrow money at high interest rates or that you cannot afford to pay back.
- · Pick an investment plan and allocation with which you can adhere for the long term. It’s important to always have some liquidity for emergencies and upcoming familial expenses.
- · When making investments, absolutely don’t buy anything you don’t understand.
- · His goal was to buy great companies when the world went on sale. Therefore, he would probably be nibbling at some of the Big Oil companies in times like these. He didn’t care what happened in 6 months. 6 years was of more interest to him.
- · Buy companies that pay good dividends and that have demonstrated an ability to do that for some time.
- · If you are looking at mutual funds, ETF’s, Stocks or some other kind of investment vehicle to round out your portfolio, know absolutely how much you are paying in fees. Additionally, what exactly are you getting in return for those fees that appeals to your sense of good value?
- · When all else fails, know the person with whom you are doing business so that there is already a relationship of trust. That doesn’t mean that they will always be correct, but it means it isn’t for lack of interest or concern.
The volatility of August supports our past thesis and reason for large cash holdings. Furthermore, it affirms our conviction to buy quality at a good value and hold it. This is our opportunity.