Saber Capital Investor Note – The Long-Term Perspective

Saber Capital Investor Note – The Long-Term Perspective

I wrote a note to my clients last week regarding my general thoughts on the presidential election, some broader historical reference points, as well as how I tend to think about these major political and macro-oriented events from my perch as an investor in stocks at Saber Capital Management.

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I spend most of my free time doing the same thing I do when I’m working: reading and thinking about businesses and possible investments. But I keep tabs on sports and politics quite closely; sports I sometimes reference here, but politics I never do. BHI is (and will remain) completely free from such opinions. The futility of political discourse seems to increase with each passing election cycle. I can’t think of many greater drags on human productivity than the time spent and ink spilled opining on why one politician is better than the other (note: there isn’t much difference).

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But like many Americans, I am interested in both sports and politics—but much more for the strategic aspects than the actual theater/entertainment value. This is especially true with politics, where I am greatly interested (in part because I love history as well as news/current events), but my interest is nearly 100% related to either the individual policies or the game theory and strategic aspects of the political process itself; whereas in sports my interest is mostly strategic (statistics, front office moves, trades, gameplans, in-game decisions, etc…), but also partly because of the theater/entertainment aspects of sports; plus sports are more fun (and contain less vitriol)!

I have always felt that the majority of the participants in the market (and certainly the average American citizen) places too much weight on who sits in the White House. In this investor note I discuss some historical reference points to illustrate why I believe this is the case, and what the proper mindset should be from the viewpoint of an equity investor, and a long-term owner of American businesses.

I don’t usually publish my investor notes here, but I thought some BHI readers might enjoy reading it.

For those interested, here is my recent note to investors: Saber Capital Investor Note – November 11th, 2016 – Presidential Edition

Have a great weekend!

Saber Capital Note to Investors: Time to “Zoom Out” (Presidential Edition)

Dear Investment Partner:

This is probably the first and the last time that I’ll go into general political and so-called “macro” concepts in an investor note, but since the election is on everyone’s mind, and since some clients have asked for my (inconsequential) opinion, I thought I’d share some general thoughts. Think of this not as a view on the election, but a view on America: the greatest “business” in the world—one that I am very bullish on and one that I believe will compound intrinsic value over many decades to come.

However, my views have nothing to do (nor were they impacted whatsoever) by the election. My overarching view of this country would be no different if Hillary Clinton had won, and my view remains the same under a President-elect Trump as it has been the past eight years under President Obama. I certainly believe that some candidates and certain policies are better than others, but my general view on America—especially when viewed through the lens of an equity investor—does not change much based on who moves into the White House.

America Needs to “Zoom Out”

Steve Jobs used to talk about “zooming out” when faced with a difficult problem or when thinking about a complicated issue. I think it would behoove the American electorate to occasionally zoom out when discussing the implications of presidential election outcomes, which seem so life-altering in the heat of the present moment.

In 1901, Theodore Roosevelt (a Republican) was sworn into office after the assassination of President William McKinley. As Roosevelt was making his routine daily rides on his horse from Pennsylvania Avenue to Potomac Park, America’s gross domestic product was around $21 billion.

Let’s fast forward a few decades to Franklin D. Roosevelt (a Democrat who governed much differently than Teddy, despite sharing the same last name). FDR was famous for bigger government and the stimulative projects and entitlement laws that collectively became known as the New Deal.

The time period from the beginning of the Republican Roosevelt’s term to the end of the Democrat Roosevelt’s time in office included a variety of economic adversities including:

  • Eight economic recessions
  • A lesser known, but still severe Depression in 1920-21 that included the worst bout of deflationary conditions since 1790, with wholesale prices dropping 37%
  • An epic financial panic in 1907 that included a 50% crash in stock prices and a run on the banks that nearly collapsed the US banking system, leading to J.P. Morgan himself pledging his own capital to shore up the banks (“The Panic of 1907” in large part led to the establishment of the nation’s central bank—The Federal Reserve—in 1913)
  • The Great Depression, a time when unemployment rose to 25% and stock prices dropped 90%
  • Two long, brutal World Wars that exacted a toll on America’s psyche and challenged its resolve

However, despite these massive headwinds, America’s GDP grew from $21 billion in 1901 when the first Roosevelt took office to around $228 billion by the time the second Roosevelt died in office in 1945—a remarkable 11-fold increase in 44 years. During this time from the turn of the 20th century through the end of the second World War, Republicans held the White House for 24 years, Democrats the other 20. America forged ahead, whether being led by the “red” or the “blue”.

See the full PDF below.

Article by John Huber, Base Hit Investing

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