'The U.S. is coming back now' - and why three investment veterans are bullish on stocks
October 11, 2011
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Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles.
This quarter’s letter provides clients with perspective on the recent market turmoil. I hope that you find this useful as a starting point for your own client letter. The letter currently runs long, so eliminate quotes that don’t resonate for you. Alternatively, you could construct your letter using just quotes from Warren Buffett – the link to his interview is at the end of the letter.
And a reminder as always to spend the time to make this letter yours by incorporating your own point of view and language.
A third quarter letter:Warren Buffett: “The U.S. is coming back now” … and why three investment veterans are bullish on stocks
“This country comes back …. we came back from Pearl Harbor and we’re coming back now.”
Warren Buffett
Charlie Rose Show – Friday September 30
Each quarter, I attempt to provide perspective on the last 90 days. This letter draws from two sources. One is a 30-minute interview with Warren Buffett on PBS on Friday September 30. The other is a September panel discussion with the title “The End of America?” moderated by CNBC’s Maria Bartiromo and featuring three participants with long experience and outstanding track records:
Larry Fink, CEO of Blackrock, the world’s largest asset manager
Pierre Lagrange, a highly respected hedge fund manager based in London
Meredith Whitney, an investment analyst who was among the first to identify the looming problems for US banks
Before focusing on the themes emerging from Buffett’s interview and the panel discussion, here’s a recap of the last 90 days.
Market performance in the third quarter
This has been a year of contrasts, starting with a first quarter that saw strong increases, with the second quarter flat.
The third quarter was ugly with a capital U, with extreme volatility and the sharpest decline since the first quarter of 2009, when we were in the throes of the global financial crisis. The main drivers of this decline were sovereign debt worries in Europe, a dramatic downgrading of growth forecasts for the global economy, a slowdown in China and mounting talk of a double-dip recession.
Below are results for key markets. These are in local currencies, so the effects of swings in the dollar are not reflected here.
2011 |
US |
Europe |
Japan |
Emerging |
World |
First Half |
+6.4% |
+2.6% |
-4.1% |
-2.0% |
2.6% |
Third quarter |
-15.2% |
-17.9% |
-9.6% |
-14.8% |
-15.3% |
2011 to date |
-9.8% |
-15.7% |
-13.3% |
-16.5% |
-13.1% |
12 months to September 30 |
+0.7% |
-10.8% |
-5.7% |
-11.6% |
-5.6% |
Source: MSCI, All cap stocks, local currency
So that’s what’s behind us; the key question is what’s ahead. Four themes emerged from Warren Buffett’s interview and the September panel discussion – the real challenges facing the US and Europe; confidence in America’s ability to respond to those challenges; the cost of risk avoidance in investing; and the opportunities for solid companies in the period ahead.
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