Nov 06 2014
November 6, 2014

Market Observations

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All major asset classes with the exception of the NASDAQ and long term Treasury Bonds experienced losses during the third quarter.  See Chart:

3rd Quarter Performance YTD Performance (Oct 27th)
DJIA -.0013 1.46
S&P 500 -.0070 6.13
NASDAQ 2.91 7.41
Foreign -7.33 -7.77
Emerging Mkts -5.83 -2.62
Commodities -9.34 -4.10
Real Estate -3.53 21.82
Russell 2000 -7.65 -3.97
Treasuries 4.15 17.75


This retreat gained strength in October and all major Asset Classes (exception Real Estate and Treasuries) had negative Year-to-Date performance as of mid-month.   The second half of October has seen some recovery with United States Large Cap Stocks being the most attractive of equity investments.

During the 3rd Quarter at Oak Springs, our models and indicators began to demonstrate that a market retreat was increasingly likely.   We began reducing and exiting positions in August and September which avoided losses and gave us a large cash position to redeploy when conditions became favorable.

A Tale of Two Investment Opportunities

Entity #1

  • Existence over 200 yrs.
  • Horribly mismanaged
  • Produces no product
  • No clear business succession plan
  • Provides services through convoluted inefficient delivery system
  • Loses money every year
  • Has to borrow money to service existing debt
  • Debt growing at unsustainable trajectory

Investment Opportunity:   Loan this entity money for 10 years in return for 2.25% annual interest and return of principal at maturity

Entity #2

  • Existence over 100 yrs.
  • Excellent management
  • Produces hundreds of products that are popular world wide
  • Makes a profit every year
  • Socially conscious/community minded
  • Solid balance sheet and income statement
  • Has paid cash back to owners for over 100 years
  • Annual cash payment to owners has increased every year for past 50 years

Investment Opportunity:  Become an owner of this entity by purchasing stock in return for a 3% cash payment (dividend) in first year and participation in future growth or risk of the entity

It appears lately that most investors prefer to invest in Entity #1, which is the US Government.  Entity #2 is the Coca Cola Co.   Go figure.  If you do not like Coke there are many other such opportunities.

Worried about Ebola??

Don’t be… at least until there is really something to worry about.  First, we have a top tier medical system that can successfully treat this virus.  It will work even better if the government will help them.

Second, more Americans have been married to Kim Kardashian, than have died from Ebola, though I’m not sure which one carries the greater distress.