Investment Club update--April 9th

Investors:


Some interesting news about the club in general, is this. I'll use a couple of names here, just hypothetically. If Grant and Elaine each had $10,000 Canadian in this account this time last year, and if Grant decided to sell on April 9th, 2008, then considering the stock market collapse, you'd think Elaine would say, "Wow, the markets got hammered, and you sold at the right time, saving your money. I wish I had sold too."

But paradoxially, it wouldn't have worked out that way.
Our account reports in U.S. dollars--and most of our assets are denominated by greenbacks. And the U.S. dollar gained so much on the Canadian dollar during that one year time period, that Grant wouldn't have had any advantage over Elaine, even if he had sold his holdings before the market crashed.

I've touched on this before, but it's bizarre enough to keep mentioning.

Our brokerage account statement reads $304,000 ish Canadian today. That's fractionally higher than it was this time last year. And as much as I wish you guys were getting "greedy when others are fearful" very little money has trickled into this account during the past year.

In U.S. dollar terms, (for my American friends) we are down 23% during the past 12 months. The linked chart reveals that we are ahead of the international index by nearly 24% during that time period, and we're ahead of the S&P 500 by roughly 13% during the past 52 weeks.

http://finance.yahoo.com/q/bc?t=1y&s=SPY&l=on&z=m&q=l&c=efa

If this was a proper retirement account, we'd have a bond component as well. In that case, we'd be profitable in Canadian dollars--over the past 12 months-- if we owned the short term Canadian bond index. And if it was an American account with 30% in a U.S. bond index, you'd likely be down about 15% U.S. over the past 12 months.

Sure we've had some luck, but we also bought businesses that were very conservatively financed. Imagine that, across the street from Brian, resides a teacher with the same salary Brian has. But the guy across the street maxes out his credit cards and personal lines of credit (to buy impresive stuff he can't afford). Brian's only financial weakness is to buy the odd used beach volleyball at a premium.

Now if the recession hits really hard, and both of these guys take a salary cut, Brian's going to find himself in decent shape. While the guy across the street still has to meet his debt obligations--and the government, despite his pleas, chooses not to give him the AIG patented quadruple infusion of cash and a $170 million bonus for a great teaching year.

Our businesses are more like Brian's finances than they're like his neighbour's. We didn't buy businesses with excessive debt. So now that financial strings are tightening, interest rates on debts are climbing, and sales for most corporations are slowing, our businesses are going to be able to ride it out better than most. And Wall Street has somewhat rewarded us for this--allowing us to give the market average a nice little drumming over the past 52 weeks.

To switch gears, we've now sold all of our WalMart shares, having made roughly 22% on the sale. With the proceeds, this morning, I bought two shares of Berkshire Hathaway at $2,998 each.

I know that economically, times are tough, but if you can scrape together some money for the investment club--and you have time to wait out the economic trauma---I think we can do well with it.

Thanks,

Andrew