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Quotes for thought for year-end reading

Quotes for thought for year-end reading

As we write this 4th quarterly comment, we can’t help but think about how lucky we were for last year’s performance, especially after a great 2013. It would be nice if, as they say in French: “jamais deux sans trois”….

As usual, the US market continues to climb a wall of worries to an annual price return of +11.39% (+17.60% in Canadian dollars) while Canada posted lower but positive return of +7.42% despite a year-end collapse of oil prices. Europe is another story. Austerity measures have slowed its economy to a halt and, without structural reforms, Europe will be struggling economically over the next few years. This scenario by no means implies the same fate for its stock markets.

At Claret, we continue to apply ourselves in our philosophy of stock pickings regardless of where the market is going. It has paid off for us in 2013 and 2014 and, hopefully, it will continue to guide us in a disciplined and patient way in 2015 and beyond.

A couple of observations so we can put 2015 in a better perspective:

Over the last 6 years (from Dec 31, 2008 to Dec 31, 2014), the US stock market had an annualized return of 17.2% in US dollar terms.

Caveat emptor (i.e. buyers beware): there are lies, damned lies and statistics.

  1. The statistics that follow are based on annual returns from December 1876 to December 2013 in US dollars. Historically,
    • There are 33 instances of 6-year periods when annualized returns are over 15%. The one-year return following these periods range from -24.90% to +52.62%;
    • There are 14 instances of 6-year periods when annualized returns are over 15% combined with a rise in long term interest rate the following year. The one-year return following these periods range from -24.90% to +43.61%;
    • There are 20 instances of 3-year periods when annualized returns are over 20%. The one-year return following these periods range from -24.90% to +47.66%;
    • There are 10 instances of 3-year periods when annualized returns are over 20% combined with a rise in long term interest rate the following year. The one-year return following these periods range from -24.90% to +43.61%;
  2. Oil prices have been erratic and on a downward trend since their peak in 2011 but have collapsed in the last 6 months. The 64 million dollar question is: has it bottomed? We have no clue but as in anything to do with economics, things lasts longer and happen faster than you think and they can go further than you can possibly imagine… In 1986, the oil price fell from USD 30.00 to USD 10.00 (-67%), in 1998, it went from USD 28.00 to USD 11.00 (-61%), in 2001, it went from USD 37.00 to USD 17.00 (-54%) and in 2008, it went from USD 146.00 to USD 30.00 (-80%). Based on this analysis, in 2014, oil will fall from USD 107.00 to… Who knows?


As you know by now, we spend a lot of our time reading, analyzing and learning. So we will take this opportunity to share with you some of the things we have come across, amidst the keen observations, witty comments and humour…


  • “The investor’s chief problem – and even his worst enemy – is likely to be himself.” (Benjamin Graham).
  • “Long ago Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents did not extend to investing: He lost a bundle in the South Sea Bubble, explaining later,” I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by his loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”(emphasis ours). (Warren Buffett). (motion = trading)
  • “You can’t predict. But you can prepare.” (Howard Marks).
  • “…it is essential to remember that just about everything is cyclical…Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero…and there is little that is as dangerous for investor health as insistence on extrapolating today’s events into the future…Few (if any) people have the ability to switch tactics to match market conditions on a timely basis. So investors should commit to an approach – hopefully one that will serve them through a variety of scenarios.” (Howard Marks).
  • “…2 important lessons about risk:
    • First, from mathematician Gottfried: “nature does work in patterns, but “only for the most part”. The other part – the unpredictable part – tends to be where things matter the most. That is where the action often is.
    • Second, Pascal’s wager: “consequences are more important that probabilities”…you have to think about the consequences of what you are doing and establish that you can survive if you are wrong.” (Peter Bernstein).
  • “The riskiest moment is when you are right…because you tend to overstay the good decisions.” (Peter Bernstein).
  • “Assets prices are often set to allow for the risks people are aware of. It is the ones they haven’t thought of that can knock the market for a loop.” (Howard Marks).
  • “…if you think markets are logical and investors are objective and unemotional, you are in for a lot of surprises.” (Howard Marks).
  • “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand”. (Milton Friedman).
  • “Facts are stubborn things, but statistics are pliable.” (Mark Twain).
  • “We are way better off by not adding to a culture of envy.” (Charles Munger).
  • “Don’t try out for the NBA if you are 5’2” tall. To find a circle of competence, compete against idiots. The slowness of what we do causes few to compete with our model.” (Charles Munger).
  • “Investing and business success is about ignorance removal.” (Charles Munger).
  • “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” (Bill Gates).


  • “The greatest gift you can give a thoughtful person is to make them think.”
  • “Crystal balls don’t exist and making year end stock market calls is a worthless endeavor.”
  • “Whether bull market or bear market, fear mongering sells.”
  • “The trend is your friend, but not at both ends.”
  • “Individual consumers are MUCH better trend-spotters than analysts and experts.”
  • “Socrates was right – roughly, “the only true wisdom is in knowing you know nothing”.”
  • “Being a financial advisor is one part investment management to five parts behavior management – and the behavior management part is just as important on the way up as it is on the way down.”
  • “EGO is not an investment strategy.”
  • “Few separate the signal from the noise, in economic data and in life.”
  • “Avoiding folly is easier than trying to be brilliant.”

And many more…

The Claret team


  • Claret
    Claret Asset Management specializes in offering portfolio management services to high net worth clients. We are completely independent and free of conflicts of interest. Claret was founded in 1996 with the objective of answering the growing needs of private investors.

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