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2020 Q1 Newsletter

“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When it does, bring a bucket, not a thimble.” —Warren Buffett

I have been communicating regularly throughout the first quarter of 2020, as the COVID-19 virus morphed from a distant, isolated threat into a worldwide pandemic, economic activity came to a screeching halt, and global equities suffered declines eclipsing 30%. Rather than revisit past developments, I will focus on What’s Important Now (WIN), for there is much we can and must do to take full advantage of the opportunities that currently lie before us.

Let me begin with the assertion that, although there is much I do not know about the scope, magnitude, and duration of the current unpleasantness, I am reasonably certain of all the following:

  • The United States and much of the world are likely already in recession.
  • At some point in the not-too-distant future, the number of new coronavirus cases will peak, then taper off.
  • Once the virus is deemed reasonably under control, people will emerge from their social distancing cocoons eager to resume working, shopping, dining, vacationing, and attending football games - with a vengeance.
  • When (not if) they do, the global economic engine will roar back to life in response to massive pent- up demand.
  • Although some may not survive, economic Darwinism will ensure plenty of Great Companies emerge from this crisis stronger, healthier, and quite a bit more valuable than they are today.

Given this, and despite much current uncertainty, the most rational path forward is as follows:

  • We will fund all remaining 2020 distributions using cash and/or our Bear Market Reserves (which, incidentally, have spiked during this crisis, exactly as intended).
  • We will hastily and hungrily use cash contributions and dividends to accumulate additional shares of our globally diversified equity portfolios at temporarily discounted prices.
  • We will aggressively rebalance our portfolios in line with our target allocations with broad exposure to multiple countries, asset classes, investment styles, and over 13,000 of the World’s Great Companies to ensure full participation in the inevitable recovery, regardless of who the winners are.
  • Where appropriate, we will discuss planning opportunities available for you and/or your business through the recently enacted CARES Act.

Predictably, preliminary Lipper data show that during the first quarter of 2020, panic-driven “investors” liquidated equity mutual funds and ETFs at levels not seen since the Great Recession. Meanwhile, DEM deployed over $6.4 million worth of net new assets into our beautifully diversified portfolios. Let the lemmings lose, while we WIN.

It’s currently raining gold Spartans. Excuse me while I place our buckets.

Don Davey
Senior Portfolio Manager
Disciplined Equity Management
Plan Appropriately, Invest Intelligently, Diversify Broadly, Ignore the Noise



2020 Q1 Market Index Returns

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