It’s okay to feel good

Here’s a headline you’re not ever likely to see: “Good news breaks out!” The media always prefers a crisis.  Nonetheless, behind the relentless drumbeat of negative news coverage (Europe! Deficits! Slowdown!), there is unmistakably good market news across the board so far in 2012.  Let’s look at a few facts.

What’s up?

Remarkably, almost all major asset categories are up.   The S&P 500 is up more than 13 percent this year and its cousin, the Dow Jones Industrial Index is up more than 9 percent with dividends.  Likewise, there is good news in the bond world as the yield on the benchmark 10 year US Treasury has declined from 1.97% to 1.65%, propelling prices upward.  Gold is up, just barely, but up.  Real estate, as represented by REITS, is up 15 percent.

Broadly speaking, stocks, bonds, and alternative investments are higher in 2012, though the media are chasing other, more depressing stories.

Feeling bad

By contrast, some very well off, supposedly privileged investment groups have been having a hard time with returns, and with fees.   The Kauffman Foundation, one of our country’s largest philanthropies, just released its study of venture capital returns, and the news is not good.  The CIO’s conclusion is that over 22 years they did not see a venture capital firm that could beat public markets by any meaningful amount.  With all that money and access to the so-called best information and investments, the report is a firsthand indictment of a venture capital industry that hasn’t delivered.

On the expense front, this study of 50 state pensions sees overcharging and underperformance.  “The vast majority of public pension systems in the United States contract with Wall Street firms to select the publicly traded stocks and bonds that comprise the bulk of the systems’ investment portfolios,” says the study.  Quoting further:  “According to the findings, state public pension funds spent over $7.8 billion in fees last year alone – a 15-percent increase over three years – despite the consistent failure of money managers to hit target returns or outperform passive equity index funds, which charge lower fees.”

This is not new news to indexers, who “refuse to pay for what they don’t get”

Happiness is possible

So there you have it – a simple story in the third week of August that points out how indexing, cost control, and avoidance of complicated investment strategies can put a smile on the faces of many investors.  The happiness is not necessarily permanent or ever-present, but at the same time, it’s important to recognize when good news does indeed break out, as it has so far in 2012.


For our most popular posts, click here.

This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

Nothing in this article is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.

Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.

Inclusion of index information is not intended to suggest that its performance is equivalent or similar to that of the historical investments whose returns are presented or that investment with our firm is an absolute alternative to investments in the index (if such investment were possible).  Investors should be aware that the referenced benchmark funds may have a different composition, volatility, risk, investment philosophy, holding times, and/or other investment-related factors that may affect the benchmark funds’ ultimate performance results.  Therefore, an investor’s individual results may vary significantly from the benchmark’s performance. 

Weekly Articles by Osbon Capital Management:

"*" indicates required fields