- Claret - https://claret.ca -

Quotes for thought for year-end reading

Quotes for thought for year-end reading [1]

As we write this 4th quarterly comment, we can’t help but think about how lucky we were for last year’s performance, especially after a great 2013. It would be nice if, as they say in French: “jamais deux sans trois”….

As usual, the US market continues to climb a wall of worries to an annual price return of +11.39% (+17.60% in Canadian dollars) while Canada posted lower but positive return of +7.42% despite a year-end collapse of oil prices. Europe is another story. Austerity measures have slowed its economy to a halt and, without structural reforms, Europe will be struggling economically over the next few years. This scenario by no means implies the same fate for its stock markets.

At Claret, we continue to apply ourselves in our philosophy of stock pickings regardless of where the market is going. It has paid off for us in 2013 and 2014 and, hopefully, it will continue to guide us in a disciplined and patient way in 2015 and beyond.

A couple of observations so we can put 2015 in a better perspective:

Over the last 6 years (from Dec 31, 2008 to Dec 31, 2014), the US stock market had an annualized return of 17.2% in US dollar terms.

Caveat emptor (i.e. buyers beware): there are lies, damned lies and statistics.

  1. The statistics that follow are based on annual returns from December 1876 to December 2013 in US dollars. Historically,
    • There are 33 instances of 6-year periods when annualized returns are over 15%. The one-year return following these periods range from -24.90% to +52.62%;
    • There are 14 instances of 6-year periods when annualized returns are over 15% combined with a rise in long term interest rate the following year. The one-year return following these periods range from -24.90% to +43.61%;
    • There are 20 instances of 3-year periods when annualized returns are over 20%. The one-year return following these periods range from -24.90% to +47.66%;
    • There are 10 instances of 3-year periods when annualized returns are over 20% combined with a rise in long term interest rate the following year. The one-year return following these periods range from -24.90% to +43.61%;
  2. Oil prices have been erratic and on a downward trend since their peak in 2011 but have collapsed in the last 6 months. The 64 million dollar question is: has it bottomed? We have no clue but as in anything to do with economics, things lasts longer and happen faster than you think and they can go further than you can possibly imagine… In 1986, the oil price fell from USD 30.00 to USD 10.00 (-67%), in 1998, it went from USD 28.00 to USD 11.00 (-61%), in 2001, it went from USD 37.00 to USD 17.00 (-54%) and in 2008, it went from USD 146.00 to USD 30.00 (-80%). Based on this analysis, in 2014, oil will fall from USD 107.00 to… Who knows?

***********************************************

As you know by now, we spend a lot of our time reading, analyzing and learning. So we will take this opportunity to share with you some of the things we have come across, amidst the keen observations, witty comments and humour…

PICKED UP IN OUR READINGS:

RANDOM QUOTES AND THOUGHTS:

And many more…

The Claret team