- All Earnings are Not Created Equal February 2012
- Pockets of Optimism January 2012
- THE ELEPHANT IN THE ROOM December 2011
- Biographies of Greats November 2011
- 4 Years Later... October 2011
- Great Job, Jobs September 2011
- Highest Duty August 2011
- Wealth Building vs. Income Producing July 2011
- Location, Location, Location June 2011
- Fishing Season May 2011
- Interest Rate Time Machine April 2011
- The Unique Structure of Berkshire Hathaway March 2011
- Mistakes February 2011
- What Do You Think of the Market? January 2011
- UN-Investible Growth? December 2010
- Where The Wind Blows November 2010
- Our Spence Asset Management Team October 2010
- The Income Dilemma September 2010
- Earnings Season August 2010
- The Squeeze July 2010
- Monomaniacs June 2010
- The Blame Game May 2010
- Bargain Hunting April 2010
- The Juice March 2010
- Know What You Know February 2010
- The Impact of Entitlements and Borrowing January 2010
- As The Smoke Clears December 2009
- The Reality of Mortality November 2009
- Green Machines October 2009
- Expanding our Horizons September 2009
- The New Normal August 2009
- Dragon Slaying July 2009
- A Tale of Two Countries June 2009
- The Trouble with the Truth May 2009
- What About Inflation? April 2009
- The Ball and the Scoreboard March 2009
- Noise versus Signals February 2009
- Resolutions January 2009
Monomaniacs June 2010
These days, financial explosions are happening all around us; the latest being the international spectacle of the follies of Greece and the European Union. In contemplating a country occupied by an army of government employees who are almost all bent on retiring at age 50, we are reminded of what former British Prime Minister Margaret Thatcher once said:
“The trouble with socialism is eventually you run out of other people’s money.”
So, as the old continent tries to figure out how to keep what good old Maggie said from coming true, we remind ourselves that there are in fact certain truths associated with successful investing in common stocks that will not change over longer periods of time, regardless of what is going on with Greece and the E.U.
Let’s revisit them:
All businesses require investor capital, but some businesses require a lot more capital than others. Businesses that feature low capital spending requirements are usually far better investments over longer periods of time than those that demand more capital.
Even the most successful businesses can wind up borrowing money at one time or another. However, those that rarely if ever require debt are usually much better investments over longer periods of time than those that require more debt.
Groups of human beings run companies. All management teams that are retained by boards establish track records over time. Companies that have established much more consistent performance records usually have better management cultures than those that produce spotty track records.
Unlike bureaucracies, all companies must compete. Identifying companies that compete against entities that are far less efficient and far less well-managed often gives an investor the edge he or she needs to be successful- unless that company is competing against government.
From time to time the stock market will fall in love with some of the stocks that feature the best business characteristics and temporarily diminish the potential to earn higher returns on them.
Regardless of what is going on with the E.U. the power of the federal government in Washington D.C. has been increasing steadily since 1789. And despite Thomas Paine’s profound declaration that: “The government that governs best governs least,” the powers of Washington D.C. feature the most compelling upward sloping trend line. And this is true regardless of which political party is in power. Accordingly, government’s influence on all aspects of life figures to grow and is very unlikely to shrink.
Regardless of what is going on with the E.U. there will be continuous demand for some of the most basic consumer products. There are many products that we pull off the shelf and put into our shopping carts each week regardless of a hurricane, earthquake, tornado, or massive oil spill. Therefore, it is hard to envision any measures Europe might take that will eliminate demand for these products in the future.
The need to efficiently deliver goods to consumers all over the world will remain constant. While the mix of goods human beings may purchase are quite likely to gradually change over time, the need for the efficient transportation of goods faces relatively good future prospects.
Human beings need to insure their most valuable belongings. We believe independent insurance agencies in growing areas will continue to be in the best position to offer the widest array of products and services that address the needs of people wanting to insure their belongings.
The emergence of China as a major energy consuming nation continues. We believe that this situation is not a temporary phenomenon. We also believe that the disaster in the Gulf of Mexico can only serve to heighten the need for the U.S. to make intelligent long range decisions on all aspects of energy consumption and conservation.
We mentioned that we see a need for America to insure their belongings. One of our most precious assets each of us has is our health. We see steadily increasing demand for services and processes that help us stay healthy.
We also see America’s problem with controlling rising heath care costs continuing. Each year we have paid more for our health insurance. And despite higher premiums, we see a continuous need to buy health care insurance.
Despite the economic downturn nearly all human beings dearly love their companion pets. They will spend their resources to keep their beloved companions healthy.
Over time, electronic transactions will increase steadily. The use of cash and checks is in a secular decline on a global basis.
The advent of the computer/information/internet age unleashed an almost limitless potential for data gathering, transfer, and storage. Shares of companies that are establishing themselves as superior forces in the areas of gathering, transferring, and storing highly relevant data have a great opportunity to be successful investments.
Developing the discipline to ignore the noise and stick to these fifteen basic truths is crucial. In the face of all the handwringing over the current E.U. crisis we are reminded of what the great quality control expert Peter Drucker said,
“Whenever anything is being accomplished, it is being done, I have learned, by a monomaniac with a mission.”
Our mission is to remain solely committed to executing around these basic ideas, monomaniac style.
—Jim Spence, Eric Walton
Spence Asset Management, Inc.2455 E. Missouri Ave. Suite C Las Cruces, NM 88001 575-556-8500
The information contained herein is for informational purposes only without regard to any particular user’s investment objectives, risk tolerances or financial situation and does not constitute investment advice, nor should it be considered a solicitation or offering to investors. To determine if investment in a Separately Managed Account with Spence Asset Management is an appropriate investment for you please call 1.800.230.1840.
Investment Advisory Services are offered through Spence Asset Management, a federally registered Investment Advisor. Investment Advisory Services offered through IAR’s of Spence Asset Management, a Registered Investment Advisor to all residents of the United States.
The views expressed here are those of Spence Asset Management and are subject to change with market conditions. The information contained in this newsletter is derived from sources believed to be accurate. You should discuss any legal, tax, or financial matters with the appropriate professional. Neither the information presented nor any opinion expressed constitutes investment advice or a solicitation for the purchase or sale of any security. Market forecasts cannot be guaranteed. Past performance does not guarantee future results.