2020-01-06

“An oriental wise man always used to ask the divinity in his prayers to be so kind as to spare him from living in an interesting era. As we are not wise, the divinity has not spared us and we are living in an interesting era. In any case, our era forces us to take an interest in it. We are at sea. The writer, the artist, like the others, must row in his turn, without dying, if he can, that is, by continuing to live and create.”

These lines come from a speech called “L’artiste et son temps” by one of my favourite authors, Albert Camus, recipient of the 1957 Nobel Prize for Literature. Even though Camus is talking about artists in his time, I can strongly relate to what he is saying and, for the purpose of this article, we should replace “artist” with “investor”. Let me explain!

Long-term, Mr. Market is a compounder, short-term he is often a disruptor. Last April, after a 6.4% surge in the monthly performance of the Fund, I advised that out of 14 of the 136 months that I had been running this strategy, the monthly performance was higher than 5%: six times in 2009, twice in 2010, once in 2011, 2013, 2015 and 2017, and twice in 2019.  So let’s do the maths!  I argued that the 2009 pattern “could” repeat itself. I even suggested that the SPI, our benchmark, could consequently reach in excess of 13’000 points. Well not quite, but close! It reached 12’989 on December 27, 2019 and topped 30% over the FY2019, for the first time since 2005 – in other words, twice in 20 years.  And let me remind you that between 1958 and 1997, 8 years - 1959, 1960, 1961, 1967, 1975, 1985, 1993 and 1997 – Mr. Market shot up in excess of 40%. This has not happened once in the last 2 decades, this century, this millennium.  On the other hand, 2009 was our best year when the Fund almost compounded 40%, beating our benchmark index by a large margin.

Against all odds, 2019 has finally been a “grande année boursière” for Mr. Market, since a 30% performance is an exceptional occurrence in a ZIRC (Zero Interest Rate Capitalism) environment. For the Fund, on the other hand, Mr. Market has been a disruptor in 2019, with it achieving an absolute performance of “only” a little higher than 17%.  Over the past 11 calendar years the Fund has compounded 9.1%, but is still 8% to 10% below its intrinsic value.

And now for your $1 million dollar question! “Pierre, what will 2020 bring?”

My response: “I don’t know. But what I do know, to paraphrase Albert Camus, is that I am at sea, that I must row in my turn and continue to live & create.” As was the case in the 2008 trough: “in the midst of winter, I found there was, within me an invincible summer”. Another Camus quote, by the way!