Market Commentary
4th Quarter 2013
January 2014
Prefatory Remarks
This is not merely the time for the obligatory year”end review; it also happens to be the beginning of our 20th year. On reflection, one of the most persistently irksome aspects of our business is the often Alice In Wonderland”like inversions between investment reality as we see it and as reported in the news media—and which is the cause of so much investor reactivity and damage. There really ought to be a law. But there can’t be a law, so there will be some writing; and, taking liberties in our anniversary year, more than the usual amount.
Introduction
As surely as night follows day and less ebullient moods follow elation, so do the inevitable questions follow a 35% or 45% return year in stocks: How can the good performance continue? Aren’t prices too high? These are really questions about price patterns, not business values. We’ll answer soon enough, but first a review of some of our quarterly commentaries of the past few years. This is much condensed, much excerpted, and very selective. But recalling some of the landmarks along the way can help clarify the present and perhaps a bit of the road ahead. One could skip this section without being rude, though, and move on to “What Does the Press Have to do With My Investments?” (page 7), which is the introduction to the valuation discussion and expected returns. Or one could go straight to page 13.
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