It is with profound sadness that we say goodbye to our long-term colleague, Suzanne Lawrence. She died of cancer on April 27th at 9:30am. Suzanne was a person of great integrity, commitment, and warmth, and a trusted Client Services Associate and Manager of Operations for Abacus for over thirteen years. She taught us how to slow down in this fast world, and deliberated thoroughly before making important decisions.
Investors' fears about an unpredictable future will play a role in the success or failure of their investment experience. Strangely, some of the most successful investors might be those with brain damage, at least according to The Wall Street Journal article "Lessons from the Brain-Damaged Investor."
Corruption, deceit, and greed have contributed to the current economic climate and created fear, uncertainty and doubt for many Americans. This has caused some investors to wonder if the academically supported investment strategies should be altered in light of today's economic challenges.
Over the summer I read The Big Short, by Michael Lewis. It delves into the inner workings of some of Wall Street's most powerful investment ﬁrms and rating agencies, and uncovers the conﬂicts of interest that were largely responsible for the sub-prime meltdown.
When the markets are scary, we tend to hear a particular question, "What are you doing to protect me?" As a wealth management ﬁrm that promotes the idea of "passive" investing, Abacus runs the risk of being perceived as a ﬁrm that does nothing.
Agliophobia, the fear of pain, is in the air. The pain investors felt in 2008 may have diminished somewhat, but in place of that pain is now a fear of having to feel pain again, that we're not out of the woods yet, and that another 2002 or 2008 could be right around the corner.
In 2009, diversiﬁcation came back into vogue. All stock asset classes, REITS, commodities and bonds had positive returns last year. In 2008, the only asset classes that didn't lose were cash, CD's and short-term bonds. We believe that diversiﬁcation works over the long-term and that 2009's outperformance by certain asset classes such as domestic and international small cap equities and value equities is repeatable.
As we enter the season of giving and giving thanks, I realize with some regret that I haven't been as charitable this year as in years past. But, I justify, how could I possibly give as I have in the past? My income is off by 50% this year! Surely if there's a time to cut back, to retrench, to be more conservative, this is it.
My Volvo wagon is 12 years old, has soiled carpets (I've got two kids!) and the stitching on the leather seat is coming undone. But, the most irritating thing is the driver's door which creaks like a train braking as it enters Grand Central Station.
If you have been holding your breath since asset values started to decline last year, we suggest you relax and breathe a little. From April through June most of the stock, real estate, and commodity mutual funds we use increased in value by 15% to 35%.