Market

A.G. Campbell Advisory's Market Commandments

·          You cannot time the market. Calmer heads are created by years of experience as an investor and knowing important facts.

Since 1929, there have been 25 Bear Markets. The average Bear Market lasted 10 months. The average bear market loss was (35%). The smallest loss was (21%), and the largest was (62%) in 1932. The average frequency of Bear Markets is every 3.4 years. The last Bear Market ended in March 2009. Therefore, we are way overdue.

Since 1929, there have been 25 Bull Markets. The average Bull Market lasted 31 months. The average Bull Market gain was 104%. The smallest gain was in 2001 and was +21%. The largest gain was 582% from 1987-2000. The average frequency is every 3.4 years. The present Bull Market is over 72 months old and a pullback is necessary.

·         Things are never different. People incorrectly say that “this time things are different.” Their intent is to explain that the fundamental rules and principles of investing have somehow changed this time around.

For example, had investors not believed that “value investing” had become obsolete from 1995-2000 and bought dot coms with stretched valuations, much money could have been saved. They justified their actions by saying that the old principles of investing didn’t apply and that the technology revolution justified the crazy prices. They were wrong.

·         Turn off CNBC and leave the worrying to us. Part of hiring an investment advisory firm is to allow us to act in your best interest and for you to do other things.

 

·         Have enough cash and fixed income investments to make the moves in the market of little concern. This allows you to be a long term investor in stocks and reap the rewards.

 

·         Own investments that have been through the ups and downs of the markets and have been fine.

For example, American Express Company (AXP) traded at $9.71 during the financial crisis on March 06, 2009.  It has been as high as $93.17 in early January of 2015 and closed today, 1/13/16, at $62.85. As an intelligent investor, you must ask yourself: was AXP really worth 6-700% less than today, just 6.75 years ago? No, of course not. These are the results of the extreme movements of the market in irrational market panics!

·         “Buy right and hold tight.” This quote is from John Bogle’s 10 Rules of Investing.  A simple investment strategy with proper attention paid to liquidity needs, risk tolerance preferences and proper asset allocation can be much better than more complex expensive strategies.

 

Simply refer to these commandments every time you feel emotional or nervous about the market, you will save yourself a lot of time, worry, and money. 

December 2015 Commentary

How the Grinch stole Santa’s Rally into the New Year: December 2015 Outlook

Santa never came. We childlike investors represent all the little Who Ville citizens, including yours truly little Zandy Who. The Grinch left us lumps of coal in our stockings and took our zonkers for zonk bopping and our honkers for honk hocking.  Luckily, we as intelligent investors don’t have to put up with this Dr. Seuss metaphor for much longer. Simply put, the fear in the market is due to two things: falling oil prices and the actions of the Federal Reserve.

For the month of December, we finished the month and year very flat. Unfortunately, the Grinch wasn’t satisfied with the Christmas spoils. He decided to begin 2016 by scaring the investing public to death. It is on this point that we wish to opine. China has been a problem forever. The issue isn’t the economy or a depression; more simply, it’s the lack of transparency that the world has with such a huge country. The fact that we can have something so large and economically consequential to the United States and the rest of the world and simultaneously be opaque is the real reason for all the volatility. What happens in China stays in China. The unknown economic effect on the world is exactly what Wall Street hates and punishes with down markets!

On the other hand, I’m not buying all the fear mongering.  Why is what’s happening in China any different from the Asian contagion? We survived that time. In fact, I think the glass is more than half full: unemployment is lower (I know it all depends on who, what, and how you measure, I got it). Interest rates are still very low and will be increased carefully over the first ½ of the year. This adjustment will put bullets back in the Fed’s gun; therefore, our world in the United States is more stable. Finally, while the precipitous falling price of oil has been painful, the consumers win at the pump, and investors win with some bargains. I promise you that I am not being Pollyanna about the investment landscape; there are plenty of landmines. Our goal in 2016 is to use our newly established partners within the firm and our investment tools to make sure that we bounce on to higher account values in the near future which is why we cannot take panicky irreversible action today.

In the spirit with which we began this December outlook, we will quote one or our favorite authors, Dr. Seuss as we think about the beginning of this New Year:

“I’ve heard there are troubles of more than one kind; some come from behind. But I’ve brought a big bat. I’m all ready, you see; now my troubles are going to have troubles with me! “

Happy New Year!

 

September Commentary

“Don’t Listen to the Voice of Your Low Moment.” 


I can’t remember who gave me this wise advice, but I think it was my father. Dad has been an incredible investor his entire life, and it would be fitting that he gave me this guidance along with his thoughts about the wasted energy involving “worry.” I think this approach to life is also very applicable to investing and much of the volatility experienced by all in the past quarter. Additionally, the month of September was unpleasant by any measure. The performance of the S&P 500 for the month was (2.53%). More painful is that the S&P is negative 6.59 for the year through September with the Dow Jones and NASDAQ being equally painful. But, much of our stress can be averted by a simple strategy. The most important principle is to have enough “cash” on hand to ride thorough the storm. That is one of the most important points about investing assets in any stock market. The 3 requirements for successful investing in the capital markets are: time, accessible liquidity, and the proper risk tolerance. Without any of these 3 criteria, an individual investor is not adequately equipped for the common ups and downs of markets. Some people would add patience as a close fourth requirement, but I believe patience to be part of the time element requirement. 


The most important thing that any of us can do at this time is take the following 3 action steps: first, set up an appointment with A.G. Campbell Advisory for a year end strategy session. We want to talk with you! This session is to review goals, liquidity, and the amount of money invested in the capital markets. We will also review upcoming needs, and risk tolerance. Second, expect to use down markets like this one to be opportunistic about repositioning for the purpose of not paying capital gains taxes and upgrading quality at lower market prices. Third, and finally, be open to new ideas about how to accomplish your goals and making sure that you don‘t own assets, real estate or anything that has outlived its usefulness to you or your family. When we do find these investments, there is often tremendous nostalgia involved which makes letting go emotionally difficult. Just remember: things are just things and why let the tail wag the dog? How crazy would it be to be a prisoner of things that are supposed to make your life better? Don’t do it, and a review with us will make sure that this doesn’t happen. 


Finally, it is normal to feel awful when the markets are down by 7% in one quarter! It is also very normal to feel like your stocks will never recover, you are doomed, and the world is coming to an end. Again, this is unpleasant but normal. What history tells us is that, “so far,” this has NEVER been true. For those people who like to worry and say, “Well, this time it’s different because of a, b, and c.” I give them a big fat raspberry because the only difference is that it’s now and not 2008. By the way, had you held many of our investments since 2008, you would have regained your losses and made up more ground in many cases. The point is to take action about things that you can control and leave the rest to us. 


Warmest Regards,
Zandy Campbell, CEO

 

March 2015 Market Commentary

The major equity indices were negative for the month of March, and so far in 2015, volatility is the name of the game. The equity markets experienced negative returns in January, only to see some positive returns in February, and then negative again in March. For the quarter, this resulted in the major indices being up less than 1%.

While it’s important to understand what’s happening in the financial markets and the major stock and bond indices, the actual performance of these benchmarks is pretty unimportant for most people. We chuckle that so many people and institutions are wed to this archaic form of measure. Simply put, the indices mean little because our clients are not the indices. To be an index would mean never having any cash on hand, zero. Furthermore, these benchmarks are often heavily over weighted by one particular industry due to its’ popularity; for example, the S&P 500 performs in line with technology due to the market capitalization of Apple. Again, this is ridiculous; however, if nothing else, Wall Street will always be buoyed by the spirit of competition. Competition requires scoring, and scoring requires a benchmarking system by which to judge. All of that said, not one bit of that system makes you a better investor.

For the past 9 months, our investments in natural resources have been a short term anchor to performance. This temporary shortfall doesn’t affect our thinking about this vital industry in the least. There are four important points about this investment: first, the industry is by far one of the best values in an overly high market today. Second, we don’t buy any company without at least a 3 to 5 year time frame. History has taught us that to do otherwise causes investors to lose money. Third, many of these oil and natural gas companies are selling at a fraction of their cash values which means the market is giving them an enterprise value of zero. This is silly because Putin wants to play war games, and the United States and Saudi Arabia know that low natural resource prices keep him in line. Thus, A.G. Campbell Advisory has used this as an opportunity to own these companies at a fraction of their true worth. Finally, we believe that an oil price of $65-$70/bbl could move these equities quite significantly; whereas, with an abysmal GDP in the United States, other companies are going to find it more difficult to report remarkable revenue increases and move the needle.