The Berkshire Hathaway 2017 Annual Report has just been released (download from here).
Below is a word cloud generated from the Chairman’s (Warren Buffett) Letter to the shareholders in the report.
The Berkshire Hathaway 2017 Annual Report has just been released (download from here).
Below is a word cloud generated from the Chairman’s (Warren Buffett) Letter to the shareholders in the report.
This coming Friday, 16 February 2018, will be the start of the Chinese New Year.
The following chart plots the average performance of the S&P 500 Index for each animal year since 1950. For example, Ox years started in 1961, 1973, 1985, 1997, 2009; and the average performance of the market in those (Chinese) years was +14.0%.
NB. The Chinese calendar is based on the lunar year cycle and so performance has been calculated for each lunar year – not the corresponding calendar year.
The Chinese New Year starting this Saturday will be the Year of the dog!
This is very good news for investors, as since 1950 dog years have the strongest average returns of the S&P 500 Index of any of the Chinese zodiac animals. Over the last 50 or so years the average lunar year return for dog years has been an impressive 16.8%.
The following table shows the stock market returns for political leaders since they came into office. The table is ranked by the final column – the compound annual growth rate of the market returns.
For example, Shinzo Abe has been prime minister of Japan for 62 months, over that time the Nikkei 225 Index has risen 111.2%, which is a CAGR of 15.7%.
Political Leader | Country | In Office (months) | Stock Market Return (%) | Stock Market CAGR (%) |
Michel Temer | Brazil | 18 | 41.4 | 27.2 |
Donald Trump | US | 13 | 18.7 | 17.7 |
Shinzo Abe | Japan | 62 | 111.2 | 15.7 |
Narendra Modi | India | 45 | 38.4 | 9.2 |
Angela Merkel | Germany | 149 | 139.5 | 7.4 |
Xi Jinping | China | 64 | 41.0 | 6.8 |
Lee Nak-yeon | South Korea | 8 | 4.5 | 6.6 |
Malcolm Turnbull | Australia | 29 | 16.2 | 6.5 |
Theresa May | UK | 19 | 7.1 | 4.4 |
Mariano Rajoy | Spain | 75 | 17.1 | 2.6 |
Vladimir Putin | Russia | 70 | -16.4 | -3.1 |
Emmanuel Macron | France | 9 | -4.5 | -6.1 |
The LSE will be closed on the following days in 2018-
Date | Holiday | Note |
January 1, 2018 | New Year’s Day | |
March 30, 2018 | Good Friday | |
April 2, 2018 | Easter Monday | |
May 7, 2018 | Early May Bank Holiday | |
May 28, 2018 | Spring Bank Holiday | |
August 27, 2018 | Summer Bank Holiday | |
December 24, 2018 | Christmas Eve | |
December 25, 2018 | Christmas Day | Closes at 12h30 |
December 26, 2018 | Boxing day | |
December 31, 2018 | New Year’s Eve | Closes at 12h30 |
The above and other significant trading dates can be seen in the online Almanac Diary and can be added to your own online calendar.
How do investors measure unrealised losses?
One way is to compare the current price with the price paid for an investment. So, for example, if you pay 100 for an investment and its current market price is 90, then you are sitting on a (unrealised) loss of 10%.
But if, after buying the investment at 100, the price had risen to 120 before then falling back to 90, then there is the temptation to anchor the price at 120 and regard the current price of 90 as a 25% loss.
This 25% loss is referred to as the drawdown, which is defined as the percentage loss from a previous peak. The concept is common in trading but can also be useful for investors to understand.
The following table shows the drawdowns for the FTSE All-Share Index for the period 1969-2017.
The first thing to notice about the chart is that there are an awful lot of drawdowns! In fact, because the market doesn’t make new highs every day it is usually in a drawdown state. And this can have a psychological effect on investors.
If you look at a typical long-term chart of the stock market, and many individual shares, you will usually see a line that starts at the bottom left and increases (moderately steadily) to the top right.
This is a Good Thing – stocks go up in the long-term!
However, that chart does not necessarily reflect the actual experience of being invested in the market over this period. For this, the drawdown chart above may more accurately represent the feelings of investors. This is because investors’ portfolios are underwater for most of the time, i.e. the portfolio value is below its peak value (which will most likely be a recent strong memory for the investor).
The table below breaks down how long the market spends at various drawdown levels. For example, for 16% of the time from 1969 the market had a drawdown of 5%-10%, and it was in a drawdown state of over 20% for 27% of the time. And, while a drawdown of just up to 5% may not seem very much, in practice it is 32% of the time that investors are likely to be feeling slightly disgruntled having “lost” money.
So, while the data shows us that stock markets increase over the long-term, the direct personal experience of investing may be for investors largely that of a prevailing sense of loss. This sense of loss is something that investors have to learn to live with.
The following chart shows the tax paid by FTSE 100 companies last year. For example, the top payer was Vodafone, which paid £4,008 million tax.
Observations:
A previous post listed some of the strategies included in the 2018 edition of the Almanac, listed below is some of the additional updated analysis included in next year’s edition.
Order your copy of the 2018 edition of the Almanac now!
The newly published Almanac 2018 includes analysis of the following strategies:
The new edition of the Almanac, Harriman’s Stock Market Almanac 2018, is at the printers now and will be available from 27 November 2017. Order your copy now!