Manager’s Letter 2014 Q4

I live in Peoria, Arizona where we experience two seasons – pleasant and unpleasant. The market too has its own seasons. Since the October Manager’s Message, I feel we’ve been experiencing an “Indian Summer”. This implies that perhaps winter is around the corner, and might explain why our portfolios are sporting sweaters.

My July and October letters described a chronic condition where individual stock participation has waned even as stock markets have waxed higher. This condition still persists today according to the chart of the S&P 500 Index from January 2014 to this writing. As of mid-day on October 15, the S&P was down for the year, giving back a 9% gain. It was as if to foreshadow 2014’s operating earnings estimates which by the end of October had plummeted, and since then only declined.

I expressed my suspicions you about the rally in November. I’m still suspicious. Portfolios stand conservatively allocated relative to their benchmarks since September 16. The media incessantly celebrates every market’s tick into new highs. If the market is simply bobbing for air, it is not party hats and horns that will befit the occasion.

I wish you a happy New Year, and thank you for your continued trust.

 
Warm Regards,
Sargon Zia, CFA
January 7, 2015

Note to reader: Published quarterly, the Manager’s Letter series primarily communicates the author and Chief Investment Officer’s personal opinion on the markets. This article was originally written in October of 2015 and is provided to offer continuity and context for future articles.

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