Insights on the Current Financial Markets
March 3, 2009
| Warren Buffet's Thumb
Anchor Performance Update
Warren Buffett’s Folly
Adapting to Change
2009 has begun right where 2008 left off-- utter carnage. Heavy selling continues across multiple asset classes, leaving even those well diversified with few places to hide. Consider these market tidbits:
The stock market has declined 25 out of the last 35 days, 10 out of the past 11 days, and 7 out of the past 8 weeks. If you were looking for a definition of “Bear Market”, we are clearly in one.
Anchor Capital Absolute Return portfolios on the other hand have continued to sidestep the majority of the calamity.
Here is a quick update on our resent results:
|
Feb 2009 |
209 YTD* |
 |
| Anchor Radius |
+1.9% |
+1.4% |
| Anchor Stratus |
+0.7% |
-0.9% |
| Anchor Terras |
-0.4% |
-3.5% |
| S&P 500 Index |
-11.0% |
-18.6% |
| Anchor Alpha High Yield |
-1.9% |
-8.0% |
| Merrill Lynch HY Index |
-3.9% |
+1.6% |
*As of 2/28/2009, net of fees. We provide these inter-month updates to keep you informed on our progress. Keep in mind however that these are only snapshots, and we may finish the month higher or lower than the above results.
These are incredibly challenging markets, even for professionals. If you believe it’s time to hire a more active manager, or would like our team to provide you with a complimentary portfolio review, click here or call our offices toll free at 888.482.2200.
Ok, on to the markets.
Bear Markets and Warren Buffett
This week Warren Buffet, world famous as one of the most successful investors of all time, released the annual report for his investment holding company, Berkshire Hathaway. It was the worst year on record for Berkshire Hathaway, with a -64% loss in just the last three months of 2008.
Blogs and market reporters immediately latched onto several statements in his annual report, including:
"We're certain, for example, that the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond–"
I was further drawn to another Buffet statement from the report, that seemed to catch very little attention. Reflecting on several mistakes made in 2008 Mr. Buffet stated:
"Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."
It seems even the great Warren Buffet chose the comfort of the status quo rather than recognizing change. The apparent cost for that perceived comfort -64%.
Adapting to Change
Like it or not, the economic environment has changed, and we aren’t going back. The stock market is now trading at levels not seen since 1997. For those whose investment strategy relies upon diversification across generally rising markets, twelve years of progress have now been erased.
Investment strategies and methodologies that have served millions of investors for decades has now failed-- because millions of advisors and professionals failed to recognize change, and adapt their investment programs.
Years ago I gave up on the idea that I could somehow outsmart the markets. The desire to know the future, to know what’s coming next is human nature, but I leave forecasting and predicting future market trends to others more qualified than I. Since 1993 we have relied upon objective, mathematical trend and risk models to clearly identify when there is opportunity, and when there is risk. These investment models are adaptive by definition, and have served us well.
Three years ago we began to recognize the need for investment portfolios with a greater focus on volatility, consistency, and absolute returns. The result was the introduction of our Absolute Return Series portfolios in 2007. It’s now been 22 months since we introduced Stratus, our flagship absolute return portfolio. Since inception, Stratus has returned -3.2% net of all fees while the S&P 500 Index has declined -50.5%.
Just like Warren Buffet, Anchor Capital has identified the critical role of change. Making large changes for changes' sake, is ridiculous. But when the environment shifts, those who thrive have the ability to recognize and adapt. Of course change can be scary and unsettling, as there are few guarantees when it comes to life or investing.
However Mr. Buffett makes one thing clear-- thumb sucking is a guaranteed path to disaster.
To find out how to put Anchor Capital portfolios to work for you, click here.
Until next time,
Eric Leake
Chief Investment Officer,
Anchor Capital Management Group, Inc.
http://www.anchor-capital.com
Chief Executive Officer,
Anchor Research, LLC.
http://www.anchor-research.com
Anchor Capital Management Group, Inc., is a Securities and Exchange Commission Registered Investment Advisor. Opinions expressed are not to be construed as a solicitation to buy nor sell securities. *Anchor Capital utilizes a tiered fee schedule that offers lower management fees to accounts with higher balances. Any investment returns presented are calculated gross of fees utilizing actual accounts which represent a model strategy. Individual returns may vary substantially from those presented due to differences in the timing of contributions and withdrawals, account start dates, and actual fees paid. Past performance is not a guarantee or indication of future results. Presentation is for informational purposes only and no guarantee is made as to the accuracy of this information by Anchor Capital Management Group, Inc.
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