In the fourth quarter, the S&P 500 Index was up a bit over 7% and up 1.38% for the year. Our accounts, on average, were up 3.52% in the quarter and down 5.03% for the year. (Individual performance varies by account.) The gains for the broader Index in the quarter were mostly made by a small number of large capitalization tech stocks, Facebook, Amazon, Netflix, Google, and Microsoft among them.
The domestic quiet we wrote about in June did not last very long. Between August 17 and August 25 the S&P 500 Index dropped 11%. The S&P 500 Index bounced back about 4% and, as of September 30, it is down 6.4% for the quarter. For the year, the S&P 500 Index is down 5.3%. More >
Economic news and domestic equity markets have been pretty quiet since we last wrote to you in April. On the domestic economic front the revised numbers for 1st Quarter Gross Domestic Product (GDP) came in at -0.7%, significantly worse than most expected. More >
We’ll start with our views on the U.S. stock market, then briefly touch on some broader U.S. and global issues, then close with a summary of how it all ties together.
Tony had some ideas and observations he wanted me to share, but I thought it made sense for him to tell you directly in this edition of our Quarterly Letter. -— Ron More >
My first draft of this letter, which I wrote three weeks ago began with: Europe has not solved its problems; Nor has Japan; Nor has China; Nor has the U.S. The rest of that draft is now obsolete. Since mid-September, several items have changed—some economic, some market-related, some psychological. More >
In Europe, Banco Espirito Santo, the largest bank in Portugal, has defaulted on interest payments on its bonds. Europe has not solved its problems. In the U.S., for at least the fourth consecutive year, estimates of real GDP (Gross Domestic Product) growth, which exceeded 3% prior to the beginning of the year, have been reduced to 2% or less by midyear (now). The U.S. continues on a slow path. More >
Most of the economic and market trends we’ve been discussing for the past few years remain in place. Russia’s action in the Ukraine/Crimea may have long-term implications, particularly for Europe, but the near-term economic implications are modest. It remains to be seen whether this gets added to our long-term worry list or not. More >
Some of the things we’ve been talking/warning you about in recent years came to fruition in 2013. Specifically, medium- and long-term interest rates rose and commodity prices declined. While the U.S. Federal Reserve (Fed) continues to hold short-term interest rates near zero, rates in the intermediate to longer term, (5-30 year) increased substantially during the year, driving bond prices down. More >
Since 2008, the Federal Reserve (Fed) has been a huge manipulator of the money supply and of interest rates. Beginning with TARP (Troubled Asset Relief Program) in 2008—and continuing through Quantitative Easing II (QE2), Operation Twist, and QE3, the Fed has added over $2 trillion to our money supply (nearly $20,000 per household) and purposely bought U.S. Treasuries and mortgaged-backed securities to keep prices of these securities up and keep interest rates artificially low. More >