Investment Newsletter for the end of August, 2022

August was not a great month.

Markets are temperamental. There are many reasons for that. Some of some are rational (differing opinions regarding the value of a company, economic conditions, etc.) and some reasons are very irrational (mania and hysteria). However, regardless of those reasons the only constant of the market is movement. When it moves, it’s important to maintain composure and control. Whenever anything happens, people will scream about how it will affect the company. Sometimes their words are right and sometimes their words are wrong initially, but peoples’ reactions make the words right.

Markets have a long history of short-term irrationality. A great example would be from 1634-1637 when the price of tulip bulbs in the Netherlands soared to astronomical heights. In modern terms sometimes bulbs would sell for nearly $300,000. People paid for bulbs purely because they thought they could sell them to someone else for more money. That is not a sustainable strategy. In February 1637, the market collapsed. More recently, we had the crash of 2008. The crash was caused in part by rampant real estate speculation. Some people would buy on margin worthless properties purely because they knew they could sell them to others at a higher price. The same as Tulip Mania, eventually things collapsed. The point is that eventually rationality usually prevails. Stay rational and stick to your plan.

We cannot guarantee success in the stock market. While strong companies with good profits usually do well, sometimes they don’t. History is filled with examples of good companies with poor stock performance. What we can state is that historically good companies have good stock performance but that sometimes there is a delay. Sometimes it takes time for a company’s good fortune to be reflected in the stock price. Amazon’s stock price suffered several crashes before it become the massive success story that is today. Sometimes success takes time and you can’t let short term price declines demoralize you. The stock market is often a raging storm. In our opinion the best thing you can do is to maintain calm in the face of it.

If you have any questions about your investments, please call at any time. We sincerely hope you got value from this newsletter.

We appreciate your business and trust.

Dan and Eli

As we’re writing these to help our readers, we would be very appreciative of any input in regards to what we should write next. If you want us to write about a particular topic, please contact me. Please contact me if you would like to submit a post to our blog.

If anything that we mentioned above interests you, please consider downloading our free e-book. The book contains our thoughts on investment management and some information that we think everyone should know. You can also download it below.

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