Redfield, Blonsky & Starinsky, LLC (RBS) 2014 Investment Conference
All of us have dedicated a total of 176 years so far to RBS. We really do seem to whistle while we work. Speaking of 176 years, do you know what interest rate would be needed to double your money in that amount of time? Yell out the correct answer and I will deliver you a free beverage!
I typically read 3 newspapers every morning. I unfortunately throw out the sports sections before I get my reading ready. I mix up all the sections of all the newspapers like a deck of cards, arrange them randomly, and then I begin my reading.
“Read 500 pages like this every day, that’s how knowledge works. It builds up, like compound interest.” Warren Buffett
Historically, we typically, but not always, outperformed the stock averages in down years, and underperformed the same averages when they have strong years. Past performance is not necessarily indicative of future results.
$52,647,483 under management as of October 31, 2014.
I manage our own portfolios and our families portfolios in the same manner we manage those of our clients. I eat my own cooking!
We practice value investing. We try to find companies or investments that we feel are selling at a price that is below their intrinsic value. We emphasize a long?term approach to investing. We focus on the investment itself and not its short?term stock price performance. Our portfolios are often concentrated and focused on a limited number of investments.
We do not focus a great deal on the day?to?day “noise” in the markets. We attempt to focus on the information that will have a long?term impact on our current investments and potential investments.
Clients will often ask us to give a market prediction. Our typical answer is that we have no clue what the stock market will do over a short period. Over the short term (short term being 5 years or less), anything can happen. In the book, The Money Game, Adam Smith (George J. W. Goodman) pointed out when J. P. Morgan was asked what the market would do, he said, “It will fluctuate.”
RBS: Why long?term investing?
Why long?term investing? 1st 5 years, Tom Landry of the Cowboys had losing seasons. He built a foundation. Long?term patience was crucial. “Value investing requires time, competence and discipline. It never ends. The analysis always evolves.” Ronald R. Redfield “Learn by your mistakes. Treat past losses as an educational sunk cost”. Ronald
R. Redfield Great investor, John Templeton always carried reading materials. He claims the short time spent reading adds up quickly.
“A market downturn is the true test of an investment philosophy.” Seth Klarman “We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.” Warren Buffett
The expected dividend yield of our portfolios as of October 31, 2014 is 2.40%.
Historically, we felt most secure when a company’s dividend is 2/3rds that of the 5 Year Treasury. Our current expected dividend is 147% of the 5 Year Treasury, and 102% of the 10 Year Treasury.
RBS: 3-Month US Treasury rate
Historically when using the 3 Month US Treasury rate of 6% as a benchmark, it would take 12 years to double your money.
The 3 Month Treasury is now 0.013%. Using the rule of 72, It would would take 5,539 years to double your money.
It is my opinion that bonds as an asset class have been set up for poor returns going forward. This opinion includes all or most bonds including US Treasuries, Municipal Bonds and CDs.
It is important that an investor understands how changes in interest rates, credit quality, and inflation would affect fixed Income investments.
See full PDF here.