“If you expect to purchase stocks throughout your life, you should welcome
price declines as a way to add stocks more cheaply to your portfolio.”
— Warren Buffett
“The intelligent investor is likely to need considerable will power
to keep from following the crowd.”
— Benjamin Graham
Tuesday, January 22, 2008
As I read the morning headlines today I realized it was déjà vu all over again. As we experience the latest version of a market pull back, I am reminded how this has happened before. It is never easy to see your investments decline in value at anytime but it has become even tougher in internet based society where you can get up to the second changes in your portfolio values.
The last time the TSX saw an intra-month drop of this magnitude (12.8% as at today’s close) was the 20.3% decline in August of ’98. The TSX is off 11.4% in the last 5 trading sessions alone. Looking back for a similar week, we came up with: “9/11”, 2001, which was a 6.5% decline; April 10, 2000 and Oct 23, 2000, which were 10.3% and 11.0% declines respectively and both largely attributed to Nortel’s heavy index weighting; and Oct ’87, which was a decline of 22.5% and exacerbated by program trading.
What is common about all those periods is that the markets recovered and went on to set new market highs in the future. I don’t believe this market will prove to be any different this time around.
Your investment portfolios are designed with the knowledge that markets decline. We have added hedged type investments over the last year as a defensive strategy to protect your capital. I don’t believe we can or should try to time market declines but times like this give us an opportunity to rebalance and reposition portfolios to take advantage of the best values available. Most investments go down in tough markets but good investments recover the best.
I will be calling you over the next two weeks to discuss your portfolios and reallocation opportunities the market has created. The quotes at the top of the page are from two of the most successful investors of our generation and speak to the heart of the issues at hand. Times like now are not the easiest to experience and The Smith Group* is here to help you make the right financial decision to navigate your way through these rough waters.
Feel free to call us at anytime to talk. Best Regards,
Robert Smith
Senior Vice-President & Managing Director
Investment Advisor |
