up and down

Value Will Out: Living with the Streaky In-Between
photo shows a pair of glasses aimed looking out an office window

The ever-changing mosaic of the market holds my attention like few things do. It seems that a million factors bear on daily outcomes, mediated by human emotions such as fear and greed.

As fundamental investors, we believe that value ultimately comes out. Fads and fears may drive prices to irrational levels, but sooner or later the bottom line, the intrinsic worth makes itself known. This is why we are sometimes content to invest or hold onto unpopular companies: we’re waiting patiently.

Recently the broad stock market averages had their worst day in many months—followed the next day by the best day in many months. One day the global economy is supposedly going off a cliff; the next, all is well in the world. During such turmoil, we are happy to do our research, make decisions, and hang on.

The crosscurrents have been strong. When some of our larger holdings gain or lose 5% in a day, it has an impact on your account balances. But we pick our spots, thinking about the long term, and judge our results over the longest possible time horizon.

Streakiness in the short run, we can tolerate. It may just be the price of getting to the long-term results we desire.

For you, that means we are interested in your cumulative results: how much have you put in, and how much do you have now? This is generally a more useful, and gratifying, way to look at your portfolios. The day-to-day action can appear random, by comparison. (It goes up and down, this we know.)

In the meantime, we read and study, assessing our holdings and looking for new possibilities. Having the best clients in the world helps: we spend no time apologizing or explaining short-term volatility, for we know it will always be with us.

Clients, if you would like to talk about this or anything else, please email us or call.

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Value Will Out: Living With the Streaky In-Between – 228Main.com Presents: The Best of Leibman Financial Services

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Where Are You on the Ride?
photo shows people going down a hill on a roller coaster, yelling and arms either in the air of clutching a bar

With summer fading in such a strange year, we find ourselves revisiting old memories. This will date me, but I’m thinking about the summer thrills we used to enjoy at places like Omaha’s Peony Park or Lake Okoboji’s Arnolds Park.

Part of the fun of a thrill ride is the anticipation. There’s a story and a rhythm to each ride. On a coaster, you make the climb—with a thunk-thunk-thunk on a lot of those “classic” rides!—and you can see the drop coming. Although you won’t know what they feel like until you get there, you can see the curves ahead.

And it’s all fleeting. The climb may feel like it takes forever, the terror of the drop may flash your life before your eyes… but you don’t go up and up forever, and you don’t fall down and down forever.

Sound familiar? Clients, you’ve heard us say this exact thing as a reminder about the markets.

Part of this lesson could use more attention, though: the ride can just be a ride when we know where we are on it.

When investors enjoy the climb of a hot stock, some mistakenly rush to throw everything they have at it, not recognizing that they are already near the peak: that thing will not go up and up forever. Nothing does. (Incidentally, this exuberant behavior can contribute to bubbles.)

Likewise, some get the itch to sell out when a stock cools off—but things may just be down for now and not down forever.

We don’t have a crystal ball, and we don’t have a map, but we know there are rhythms and cycles. What pain could we save ourselves by using a little perspective?

Where are we on the ride?

Clients, we’re here to help make sense of your plans and planning. Call or email when you’re ready for us.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Up And Down Really Means Up And Down

© Can Stock Photo / webking

As long term investors we talk a lot about the need to weather short-term volatility in pursuit of long-term results. Our notion is that volatility is not risk, but an inherent feature of investing.

As years go by, many think of the market as having good years and bad years. This is based on the outcome for calendar years. The astonishing thing is how much movement there is during the course of the typical year.

“At least one year in four, roughly, the market declines.” We’ve said that about a billion times, to reiterate that our accounts are likely to also have good years and bad years, if one judges on annual returns. The object is to make a decent return over the whole course of the economic cycle, year by year and decade by decade.

But in those other three years out of four, the market also experiences declines during the course of the year. In an average year you may see a decline of 10 to 15% at some point during the year.

Our object is to leave long term money to work through the ups and downs, without selling out at a bad time. Three things help us do that:

1. A sense that everything will work out eventually, a mindset of optimism.

2. Awareness that downturns tend to be temporary, ultimately yielding to long term growth in the economy.

3. Knowing where our needed cash will come from, based on a sound cash flow plan.

Bottom line, even years that end up well can give us a rough ride. Knowing this can make it easier to deal with.

Clients, if you would like to talk about this or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

All performance referenced is historical and is no guarantee of future results.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.