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5 Things To Be Thankful For 2012

Back in 2008, around Thanksgiving time, I wrote a series called “5 Things To Be Thankful For In This Market”. Each of those five things were:

1. The Teachings of Benjamin Graham

2. Low P/E Ratios

3. The Inevitable Market Rebound

4 & 5. Black Eyed Peas and Collard Greens

If you recall, the sky was falling on the U.S. and if you listened to the pundits at the time, we were all done for. What I tried to do was point out a few thing investors could hang their collective hat on. One truism of investing is that most of the money is made when things are bad. And things were really bad back in 2008.

Four years have passed and I just wanted to see how we’ve done since then. So I decided to update the list. The 5 things to be thankful for in 2012’s market are:

1. What Warren Buffett Said

Every year in Berkshire Hathaway’s letter to shareholders, Warren Buffett drops at least a few pearls of wisdom. This year’s (2011) letter was no exception. In the letter, in a section called “The Basic Choices for Investors and the One We Strongly Prefer”, he states a simple concept:

“…investing is forgoing consumption now in order to have the ability to consume more at a later date.”

In the letter Buffett was comparing why stocks as investments are superior to other investments. But the statement, in and of itself, says so much more. It’s about the individual’s mastery over his money and the value he places on material and ethereal things. So few people I have met understand the depth of the concept of frugality – the practice of economy in allocating one’s own resources. They think the frugal person hates spending money. No, in fact the frugal person loves spending money. This is why he is frugal.

As Buffett’s quote suggests, the frugal person forgoes spending now in order to spend more and consume more and have more things, both material and ethereal, later. This is why he invests today. He understands that, done the other way around, he will have much less money and certainly won’t have the “things” he so desires. Ironically, frugality is the avenue toward conspicous consumption, not from it.

2. The Re-election of a Democratic President

Actually, this is just a fun little jab at my (many) conservative friends. But I’m only half joking. Typically, financial markets fair better under Democratic administrations. Under the Obama administration the market has followed this trend. It’s also been a period of record breaking EPS growth. From September 2008 to June 2012, the EPS of the S&P 500 has gone from 9.73 to 21.62, a 122% gain.

3. The Market Rebound Underway

Back in 2008, I wrote “I feel strongly that over the next 3 to 5 years, the market will be much much higher”. I wasn’t exacly going out on a limb there. The market’s precipitous decline had all but ensured a recovery that would be substantial. And over the 4 years since, it hasn’t disappointed. Since I wrote about the market’s inevitable rebound (Nov. 24, 2008), the S&P 500 (including dividends) has returned 76.78% which is an annualized 15.35% (the thin blue line in the chart below).

Source: Foliofn.com

The clients invested in Brick Financial’s Core portfolio fared even better over that time. The Core portfolio returned 169.41% over that time, which is 28.20% annualized (the thick blue line in the chart above). The Core portfolio doubled the return of the S&P 500 during that time.

4 & 5. Sweet Potatos and The Pies They Come In

Sweet potatos are good. It must be true, The New York Times says so. But they’re especially good in pie form (ala Jonze).

Pie ala Jonze.

Enjoy your holiday.


At the time of this writing, I and the clients of Brick Financial Management owned share of Berkshire Hathaway, Inc (BRK-B).
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