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To our clients and friends:

During 2015, the financial world lost three of its greatest investment minds. The three were Irving Kahn (age 109), Charles Allmon (age 94) and Richard Russell (age 91). If you don’t read and study finance every day, it’s unlikely you’ll recognize these names. But all three were highly successful, and were considered geniuses in their field.

Kahn worked in his NYC office until late 2014. He was interviewed by the London paper, The Guardian, as well as The New York Times just before his death. He explained that in 2014 he still used the same approach that he’d used to purchase his very first stock in June 1929 at age 24. He described his secret as “always insuring there was a ‘margin of safety’ in his investing”. He was a value investor focused on managing risk. Kahn emphasized that the teachings of Benjamin Graham—the famed value investor—always offered him a critical reminder of assessing portfolio risk. Kahn said: “If the market is overpriced, an investor must be willing to wait—you must be patient.”

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To our clients and friends:

In these newsletters, I often discuss how difficult it is to definitively predict the direction of markets over time. This applies to both short-term and long-term predictions. The above quote is one of the more famous attributed to the late Yogi Berra who died on September 22. In many ways, it is both timeless—and timely.

One more bit of humor about predictions and markets. The website Motley Fool recently made the following tongue-in-cheek observation:

“When no one knows what the economy or stock market will do next, people say there's high uncertainty. This is different from low uncertainty, when people think they know what the economy and stock market will do next. This is then invariably followed by being wrong, which they blame on high uncertainty”.

If you could follow that somewhat convoluted line of reasoning, you’re pretty sharp. Yet both of the quotations above—while intended as comedic—ring true.

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To our clients and friends:

At the risk of overexposing my readership to quotations attributable to Warren Buffett, I couldn’t help but seize upon this latest gem to launch this quarter’s discussion.

There is sometimes a fine line—a delicate balance, even—between taking risk and seeking reward. Nevertheless, at other times the distinction is more blatant. Behavioral finance plays a major role in both cases. Let me illustrate what this means.

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To our clients and friends:

I spent the last few days of March and the first week of April enjoying the beautiful ambiance and gorgeous views from a mountaintop hideaway in the Blue Ridge range of North Carolina. Those of you who’ve been to the area (or to the Adirondacks or Rockies) can relate to the wonderful sense of stillness and solitude experienced in the mountains. The quietness truly allows one to think clearly and without interruption.

The peace and serenity of the mountains is the perfect antidote for turning off the CNBC crowd and all the scaremongers and doomsday prophets in the financial media. And it certainly lets you think clearly and coherently about such things.

In today’s financial markets, there are more opinions—which might instead be more aptly characterized as chattering or blabbering—being aired in the media about this or that. There continues to be a large number of bearish commentators who are predicting Armageddon yet again. They have been wrong for 6 years now, and counting.

Our latest quote from Warren Buffett teaches us that contrarian thinking often pays dividends (no pun intended). Since the bull market began in earnest on March 9, 2009—six years ago—we’ve heard the steady drumbeat of negativity and alarmism. Yet, the market has risen forcefully over that time, and anyone who’s been fully invested in equities according to their individual risk tolerance has benefitted handsomely as a result.