Warren Buffet - Economy and Markets and Politics

04/19/2016

Dear Clients and Friends,

Once a year, we make mention of Warren Buffett’s annual letter to shareholders due to our shared belief systems regarding disciplined investing. While his most recent letter to shareholders provides plain-spoken insights in his trademark feisty and witty way, we’ve decided to revisit his 1994 letter because of its relevance today.

In this theme of dredging up writings from the past, it seems all too appropriate to rerun a title we used in our quarterly letter three years ago - Economy and Markets and Politics, Oh My. Given the current state of affairs that seems to be an ever-present condition, perhaps such a topic line would be a suitable permanent title for our quarterly letter.

Warren Buffett – Economy and Markets and Politics…
In 1994, nearly 30 years after his first letter to shareholders, Warren Buffett reflected on decisions made in the first few decades at the helm of Berkshire Hathaway.
From the 1994 letter:

We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen (business people). Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.

But, surprise – none of these blockbuster events made the slightest dent in Ben Graham’s (a famous value investor) investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.

Investors’ Take-Home
If a crystal ball would have successfully predicted the shocks that followed Buffett’s 1994 letter, it would have seen shocks from the dotcom bubble to the global financial crisis. Despite the turmoil, the US stock market* gained 584% cumulatively over the period from January 1, 1994 through March 31, 2016. To paraphrase Buffett from his 1994 letter, a different set of major shocks is sure to occur in the next 30 years. We will not try to predict these events. Instead we will adhere to a disciplined investment strategy.

Administrative Details
Along with your quarterly portfolio report, we have enclosed information that meets the annual requirement of the U.S. Securities and Exchange Commission to provide clients with our Privacy Policy and Form ADV Part 2 offering.

If you have any questions regarding your portfolio report or the other items, please be in touch. As always, we welcome your suggestions and feedback and we value your trust and confidence.

Sincerely,

Byron E. Woodman, Jr.

President

Lee C. McGowan, CFP®

Managing Director