Recent Posts by John Goltermann

An Uneventful Quarter

The 3rd quarter ended up being largely uneventful in terms of returns, but we saw a pickup in volatility in late September and broad price declines — as renewed fear crept into credit markets about possible contagion related to the collapse of Evergrande, a Chinese property developer. For the quarter, the S&P 500 rose 0.58%,…
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Why Value Investing is Harder than Growth Investing, but a Better Way to Invest

"When things are easy, I hate it." — Ernest Shackleton “Optics” are an important phenomenon in the investment advisory business. How things look from the outside matters to advisors and, oftentimes, to their customers. Many decisions are made with respect to optics -- because a carefully cultivated image and reputation of an advisory business can…
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An Obsession with the Fed Dominates Markets

Market participants and financial media punditry are understandably fixated on the Federal Reserve and perceptions of what the Fed will or won’t do. In this month’s letter, we explore some of the factors that influence Fed behavior as well as our view of what is likely to happen. The economy has more or less been on 'life support' since 2008 with zero interest rates most of that time, and huge monthly bond purchases (quantitative easing). But we have also seen heavy Fed interventions for 25 years. As such, the Federal Reserve has, in large part, become the credit market and supported equity and bond markets significantly for decades. That support overrides of market-based pricing. In final analysis, the economy is largely being administered by the Fed, instead of being allowed to function freely on its own. The positive effect of Fed administration has been that investment price declines and economic downturns tend to be brief, but the negative effects are increased possibility of consumer inflation, a lack of the 'creative destruction' of capitalism, high system-wide indebtedness, and over-inflated asset prices — all of which makes the financial system less stable and less resilient. Moreover, the moral hazard of people widely expecting bailouts causes reckless behavior. Fed emergency measures and economic bailouts have brought high speculative activity, as we have seen recently in SPACs, NFTs, retail option trading, meme stocks, etc. Historically, such environments have generally preceded an era of more conservative investing where a value-oriented approach works well.
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Value Stocks Significantly Outperform

The 1st quarter of 2021 saw a continuation of the stock price gains that have been the general trend for the last 12 years. Fed largesse, in the form of emergency measures, direct lending and balance sheet expansion, as well Congressional stimulus in the form of direct payments to qualifying individuals, continued unabated. The stock…
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