Posted by: Thomas F. McKeon, CFA on January 29, 2020
In this Issue: Review & Outlook 4Q-2019, The Ultimate Timeless Truth, Tesla and Other Valuation Absurdities, Clothier Springs Capital Partners Update, Is College Worth It? and, The Next Ten Years.
2019 was a gift from the market gods that saw the markets give investors the best year since 2013. It was a surprising outcome given the extended bull market that began in the ashes of the mortgage market meltdown in the late 2000s.
“Capturing market returns as efficiently as possible is the essence of optimized, fiduciary investing. Any departure from that simple premise is a step towards greater cost, greater risk and greater outcome uncertainty.”
Performance measurement is essential to investment management and client advice. People and institutions invest to earn a return and calculating and sharing that return is where the rubber meets the road...where the cumulative decisions and investments combine to generate results and where clients can evaluate their advisors and outcome.
Markets across the globe staged a strong rally for the year and the U.S. equity markets ended the year at or very near all-time highs. The U.S. Large Cap index gained 31.5% for the year while the U.S. Broad Market gained 31.07%. These returns are roughly three times their long-term averages.
We pay very little attention to individual stocks here at Clothier Springs Capital Management. The reason is obvious. All of the effort that goes into the research and analysis of individual publicly traded companies is not just pointless, it detracts value. As an investor or advisor it is far more productive to hold passively managed baskets of stocks, otherwise known as index funds or ETFs, and get the asset mix right for each client.
Our partnership had a solid year delivering a total return of 9.1% and a total return since inception of 18.4%. The current yield of the partnership—which derives from all the income distributions to the partnership—is 6.8%.
We have several hobbyhorse’s at Clothier Springs Capital Management. The confiscatory hedge fund, the absurdity of cryptocurrencies, income inequality and the cost and increasing irrelevance of a college education. Once a given that a college degree was a sure path to a better quality of life, it is increasingly obvious that the value proposition of a college education is in serious doubt. The article below is by Annie Lowery, staff writer at the Atlantic Magazine and was published in the Atlantic magazine online version on 1/8/2020.
Clothier Springs Capital Management will reach its 10th birthday in June of this year. Our mission and mandate remain unchanged: to help our clients meet their own stated investment objectives as efficiently and cost-effectively as possible. Wherever theory, knowledge, best practices and evidence leads us, we will go in pursuit of our self-selected mission.