Letter to RVW Investors
January - 2012
As we begin a new year it is timely to reflect and review. While we have concerns over the near and medium term regarding the massive deleveraging process that is currently under way in the USA and especially in Europe, we have no fundamental issues about the future of the European region. There are over 800m people there who will all continue to produce and consume.
Bear in mind that we are after all, lenders to and investors in businesses - and not in a currency or an economy per se. Should the Euro partially or entirely unravel the Europeans will continue to drink Coke and Nescafe, eat McDonalds and Cadbury's, use Unilever products like Dove, Vaseline and Ponds, and consume Hellman's, Knorr and Lipton brands, use iPads and Droids, clean their babies with J+J creams and wrap them in Huggies diapers. It does not much matter to us whether Caterpillar tractors and earthmoving equipment bought in Athens are paid for using Euro or Drachmas.
The RVW approach includes a very broad diversification among over 5000 successful businesses globally accessed through ETFs - and an allocation to gold and secure bonds. It is a resilient and time-tested approach, bringing you classic investment wisdom. We know that over time asset allocation is the primary determinant of volatility and returns - and that keeping portfolio costs contained is paramount.
Our over-weighting towards the large global brands – and especially those that pay regular dividends – with an underweighting in banks and financials has served you well. We share the Warren Buffett view that over the long term there is no better way to make money than to invest in large well managed businesses.
While we hesitate to make short term predictions – especially as we face choppy waters, but be assured that the long term is sure to be rewarding for those who have the fortitude to stick with sound fundamentals and ignore the headlines.
THE BOTTOM LINE: Watch the hour hand and not the second hand.