2024 Q1 Client Letter

Cybersecurity

As we move ever closer to "full digitization", cybercriminals continue to prey on the unprepared.  Despite all the technological advances around us, the primary defenses of password integrity and avoiding spurious email links remain the bedrock of all defense postures.  If you don't believe me, catch this part of this NBC News video:

CYBER AWARENESS VIDEO

The GOV official being interviewed, somewhat ironically, was the Brigade Commander my first semester Plebe Year (what I understand was the hardest of any Plebe Year) at the Naval Academy.  Incidentally, the interview occurred on "the yard" (Academy Lingo) in Memorial Hall.

 

I CANNOT repeat these basic (and simple) Cyber Defenses enough:

1) Use a Password Manager so you have unique and challenging passwords;

2) Use Multi-Factor Authentication (MFA) whenever it is offered;

3) Never give personal information on a phone call you did not initiate

If you follow those 3 guidelines, you won't be fully inoculated, though you will be much better off than most.  And more importantly, you will deter most Cybercriminals.

Interest on Your Cash

Investment Performance

In a couple of Client meetings, the topic of investment performance has also come up.  Since Investment Management is one of RAMCO's 5 cornerstones, it is certainly understandable why one would be concerned about this important metric.

 

Before going further, you should know that the VAST majority of Clients have the same basic asset allocation amongst 3 broad categories:  Domestic Equities, International Equities, and Fixed-Income.  Depending on a variety of factors, the weighting differs, though the composition of the constituent parts is essentially identical.

 

For the Domestic Equity portion, the backbone of the portfolio has been and will continue to be the S&P 500 Index, invested by means of either a Mutual Fund or Exchange Traded Fund.  For the International Equity sleeve, until recently the backbone international investment at RAMCO was the Tweedy Browne International Value Fund.

 

Please consider the following numbers:

Period #1:  March 2014 - March 2024 Total Return:

S&P 500:  229.93%

Tweedy Browne International Value:  58.03%

Period #2:  March 2004 - March 2014 Total Return:

S&P 500:  97.13%

Tweedy Browne International Value:  116.43%

I will caution you in advance - whenever ANYONE (including me) is talking about performance numbers, the writer is at a distinct advantage because he/she can choose amongst a variety of variables to illustrate his/her point.

 

The point I am attempting to illustrate deals with International Equities.

 

As any observer of Investment Performance is aware, the US S&P 500 Index has been a performance monster over the past decade.  For reinforcement, just look at the Period #1 performance numbers.  In hindsight, the obvious thing to have done 10 years ago would have been to invest everything in the S&P 500 and forget the other parts.

 

Of course, we don't know this information in advance.  For proof, look at the Period #2 numbers.  The International Commitment would have been a better decade-long commitment compared to the S&P 500 from 2004 - 2014.

 

The key here is NOT to look at recent performance as an indicator of future performance.  As if often disclaimed, past performance guarantees nothing about the future.  Moreover, had I published this letter in March 2014, the popular narrative may have been that US Equities were "dead" and we should pile into the foreign stocks.

 

Over the long-term, International and Domestic Equities have much more similar performance than we've seen over the past decade, just look at Period #2 again.  When I write that, I am making no prediction(s) about where we are going.  Rather, I am simply stating that it is possible for International Stocks to outperform Domestic ones.  Moreover, as an Investor, one has to evaluate the price of investments relative to their value and make informed judgments on where to commit funds.  

 

Right now, by most historical standards, particularly current prices relative to the earning power of the shares, Domestic Equities appear a bit stretched.  Their foreign counterparts, conversely, appear less stretched, relatively speaking.  I write that knowing that valuations can become truly distorted - those of us who can recall the DOT-COM bubble know this all too well.

 

At the end of the day, I can't predict who will triumph in the performance comparison between US and Foreign equities, which is why I recommend broad diversification amongst each.  In support of this concept, Resilient Asset Management maintains a capital account equally weighted between international and domestic equities invested in the same commitments we recommend to you...indeed, the Firm eats its own cooking in this regard.  

 

In short, unless you have a specific reason for not investing in Foreign Equities, I recommend you keep your investment allocations as we have recommended.  History has shown that "performance chasing" is a poor strategy to enhance one's investment returns.