Buffett Wisdom, The Election, Portfolio Views and Behavioral Biases – Entasis Newsletter 4Q16

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Section Summary

  • Buffet Wisdom – “We have no idea – and never have had – whether the market is going to go up, down, or sideways in the near or intermediate-term future. What we do know, however, is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
  • Market Notes – During the fourth quarter, the clearly dominant headline was the U.S. presidential election. By the time this newsletter reaches you, we will be talking about President Trump. His victory contributed to some surprisingly dramatic movements in equity and fixed income markets as “consensus” thinking seemed to rally around some major themes.
  • Equity & Fixed Income Comments – Market volatility provided us with the opportunity to make some strategic adjustments to client portfolios during the quarter.
  • Research Focus – We review the Anatomy of an Investment Decision we recently made in client portfolios to provide insight into our decision making process.
  • Client Focus – Behavioral biases are arguably one of the most harmful detractors to long-term investment compounding that an investor can experience. And unfortunately they are numerous. Combating these biases can be simple if you establish a plan, invest long-term and do your homework. That is the basis of what we do at Entasis.