Wednesday, September 3, 2008

Private Client Commentary - Long Term means Long Time

Dear Clients,

For today's commentary we'll eavesdrop once again on a conversation between our Investor and Advisor duo.

As I've suggested before, virtually all of you have been very patient as this now ten month old bear market has done a number on the value of your equity positions. I know this isn't the first bear market for most of you, and I'm guessing that's one reason why no one's getting too excited. Nonetheless, I'll bet there are times when you can relate to our Investor friend below.

Take care,

Ps: always keep in mind; if you'd ever like to chat between review meetings about the market, the economy, etc., we welcome your call.

Investor: Man this market frustrates me. Up one day, down the next. It seems like lately we're just not getting anywhere!

Advisor: I know what you mean.

Investor: You know what I mean? Don't you have anything pithy to offer me?

Advisor: Nope, I simply agree - it seems like lately, we're just not getting anywhere.

Investor: So how long do we keep doing this?

Advisor: How long do we keep doing what?

Investor: How long do we keep doing what we're doing? Which seems like absolutely nothing! And are you messing with me again?

Advisor: Nope, not messing with you, just want to be clear what you're asking. Because, as you suggest, we're not really doing much - other than sticking with our long-term plan.

Investor: Okay, so how long do we stick with our long-term plan?

Advisor: Okay, I swear I'm not messing with you, but my answer is - we'll stick with our long-term plan for a long-time, otherwise it's not a long-term plan, now is it?

And you see, this bear market we're in began just ten months ago, which at this point makes it about average in length (as past bear markets have gone). And, in investment terms, ten months is very short-term.

Investor: All right, I get it. I guess I'm just getting impatient - tired of getting my monthly statements showing my declining balance.

Advisor: I feel ya, but that's what happens when we're in a bear market. And always keep in mind - you're monthly investment statement is not like a bank statement.

What I mean is; when your bank statement shows a decline, it's because you spent some money and you truly have less of what you had the previous month. When your investment statement shows a decline, and you haven't taken a withdrawal, you still have all the stuff you had the previous month. It's just that this month's appraisal of the stuff is lower than the last month's. You indeed haven't lost unless you sell some of your stuff when the price is down - which again, you wouldn't do if you have a long-term plan. The beauty of thinking long-term is you simply never have to sell in a down market.

Now, do I need to remind you of all the underlying benefits that bear markets bring?

Investor: Oh please don't! You've made your points very clearly, over and over again with all your commentaries!

Advisor: I thought you might say that

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