With Thanksgiving approaching, it seems appropriate to take some time to consider all of the things for which we are thankful. Any such list must start with a deep sense of gratitude to Ancora’s clients who entrust us with their hard-earned assets to manage. We are here because of your trust and for that we are grateful. We are also thankful to those who have referred friends, business associates, family members, companies, institutions or other organizations our way with the understanding that we will embrace their unique circumstances and needs with the full resources that we, as a 70+ employee firm, can bring to the table.
Extending the holiday spirit into the world of investments, we have comprised a list of things we are thankful for that help us in our day-to-day work on behalf of clients. Some of the items on the list are more granular than others, but collectively they touch on the qualities that make the financial markets such a powerful medium for creating long-term wealth. So here goes.
- We are thankful for capitalism itself. It may not be a perfect system, but it remains the best system in the history of mankind for improving the standard of living for so many. Think of the societal track record of the alternatives – they are not pretty. For anyone who is unsure of capitalism, they are welcome to move to North Korea, as the saying goes.
- We are thankful for the rule of law that protects personal property rights and creates the very foundation upon which one can own shares in a business (public or private). In addition, it preserves the incentive to innovate, which ensures all stakeholders of a company benefit.
- We are thankful for Warren Buffet who, at age 89 from his quiet office in Omaha, Nebraska, continues to serve as a voice of sensibility and reason for investors. Recall that it was Warren who penned a New York Times Op-Ed in October of 2008, near the darkest days of the 2008-2009 financial crisis, famously titled, Buy American. I Am. Warren will not be around forever, something not be taken for granted, but the example he and his partner Charlie Munger have set for capital stewardship, hopefully will be.
- We are thankful to Gary Brinson, Randolph Hood and Gilbert Beebower who together authored the defining paper on asset allocation back in 1986 titled Determinants of Portfolio Performance. This piece outlined that most of the return variability, and therefore risk, in a portfolio is determined by asset allocation which, in layman’s terms, refers to how much you have in various asset classes such as stocks, bonds and alternatives. We are grateful because the paper helped establish the highly effective framework and process for allocating capital upon which portfolios are constructed and managed to this day.
- Lastly, we are grateful to Luca Pacioli, an Italian mathematician who in 1494 in his book titled, Summa de Arithmetica Geometria, Proporzioni et Proporzionalita, which translates to a Guide to Arithmetic, Algebra, Geometry, Accounting and Weights and Measures, first cited the Rule of 72. For those of you not familiar with it, the Rule of 72 is a mathematical relationship that illustrates the miracle of compound interest. To calculate the length of time it takes for money to double, you simply divide the number 72 by the annualized rate of return you think you can earn. For example, if you thought you could earn 5% on your investments, it would take approximately 14 years for your money to double. 14 years compounding at 5% would be one double, 28 years compounding at 5% would be two doubles and so on. We can’t tell you how many times we have used the Rule of 72 in helping people look at risk through a different light, and for that we thank Mr. Pacioli.
In closing, we would like to wish you all a safe and Happy Thanksgiving. We are thankful for the relationships we have with each of you. We are also thankful for the market framework that exists today and for the pioneers in investing and finance whose work, example and innovations assist us in helping you reach your unique goals and objectives.