Well, we have been reassured again. As with other times of market turmoil we turn to the Portfolio Managers that guided us successfully through 2001 and 2008. Thankfully yesterday, like other days, we received a consistent message with much the same rationale behind these messages. These managers are all encouraged by the buying opportunities they see. The value of the businesses they can buy today are attractive. Additionally the US economy is healthy. These two factors mean more to the underlying value of our investments than whether China will grow at 4% or 5% this year. These smart managers will be deploying cash and we will trust them like we have trusted them in the past. It is not different this time; it never is.
Don’t forget the three basic premises of times like these.
1. Our investments long-term performance will be driven by the income they produce. The income in our portfolios has increased the last few months regardless of the market value fluctuations. Here is a reminder of how this works: https://www.youtube.com/watch?v=cw979PB0A3Q.
2. Diversification of our accounts buffers us from the index fluctuations we see in the news. US assets priced to Cdn dollars and bonds that actually increase in value means the market value of our account will fluctuate 2-3% when the market index is down 8-9%.
3. There is a multi-trillion dollar industry based upon the average investors need to trade stocks. They only make money when people buy and sell. The quality businesses we own have not had their prospects eroded so that we do not want to own them anymore. For investors, it is better to buy and hold and…. Buy more when speculators are not willing to hold any more.