2014 Q3 Newsletter
September 30th, 2014
Reading is to the mind what exercise is to the body.
It would come as no surprise if amidst the recent coverage of gruesome ISIS beheadings, airstrikes in Syria, and acts of domestic violence by NFL players, some of you missed the US Department of Commerce recent announcement that Real GDP growth was revised upwards to an astonishing 4.6% for the second quarter of 2014. After briefly receding during the first quarter’s Deep Freeze, the ever-resilient US economy went on to explode at the fastest rate in almost three years. As always, patient, disciplined, long term investors who refused to allow their lifetime investment plans to be derailed by temporary interruptions to the permanent upward trend of capitalism have been rewarded with healthy gains in their investment portfolios thus far in 2014.
The events of the past nine months teach us the same timeless lessons that we learn by studying the events of the past two centuries. But rather than repeat those lessons here, please allow me to recommend three of my favorite books, each of which might very well be the best investment of time you will ever make:
(1) The Richest Man in Babylon by George Samuel Clason
Originally published in 1926, this book tells the fictional tale of the richest man in Babylon, Arkad, as he shares the secrets of his financial success with his very talented, yet very poor childhood friends Bansir and Kobbi. Clason uses this entertaining story to brilliantly convey the universal laws of money: Pay Yourself First, Live Within Your Means, Make Your Money Work, Insure Appropriate Risks, Plan for Retirement, Invest in Yourself, and Track Your Progress. If it were up to me, this book would be mandatory reading for every man, woman, and child in the US over the age of 16.
(2) Simple Wealth, Inevitable Wealth by Nick Murray
This book should be re-titled The DEM Bible. In it, my all-time favorite author, Nick Murray elegantly combines common sense logic with indisputable facts to illustrate two fundamental tenets of investing:
- If you have the discipline to plow your hard-earned savings into a diversified equity portfolio throughout your working years, you will inevitably become wealthy.
- If you keep your nest egg invested in a diversified equity portfolio throughout your retirement years, three things will inevitably happen: (1) you will enjoy a rising income stream that will be impossible to outlive, (2) your nest egg will continue to grow, and (3) you will be able to leave a meaningful legacy behind you.
(3) The Investment Answer by Daniel Goldie and Gordon Murray
This sixty page book is the ironic collaboration between Goldie, a former Wall Street trader who now admits that everything he believed about investing was wrong, and Murray, the DFA advisor who eventually showed him the light. Together they pose five questions that every investor must answer and explain why favoring low cost, globally diversified, equity-dominated portfolios stack the odds of success overwhelmingly in your favor.
We keep several copies of each of these books in our office and would be delighted to send any or all to any of you who have not yet had the chance to read them.
It is said that reading is to the mind what exercise is to the body. On that note, many thanks to all of you who have wished me luck in the upcoming Ironman World Championships on October 11th in Kona, Hawaii. Those interested in tracking my progress during the event in real time can do so at www.ironman.com. Aloha!
Senior Portfolio Manager
Disciplined Equity Management
Plan Appropriately, Invest Intelligently, Diversify Broadly, Ignore the Noise