Market data:

In Process We Trust

The current geopolitical environment is certainly keeping us all worried, or entertained, depending on one’s sensitivity. A bombastic and tweet-driven administration in the US, a fragmented and drifting European Union, a certified lunatic at the helm of a reclusive but quasi-nuclear fiefdom would seem elements of a modern Game of Thrones TV series and yet they are real political and economic facts we have to deal with daily.

The common reaction is to perceive such news as unique and so certainly destabilizing that any investment decision should defer to them and be hibernated.

The truth is one would have a very difficult time to frame an historical period of some acceptable length (say longer than a year) when “unique and destabilizing” news was not the norm. History repeats itself in very short and predictable news-cycles as it is driven by the same socio-economic dynamics over and over again. Yet, in spite of a recurrent inability of breaking with some dysfunctional political behaviors, our economic blueprint has generally improved over time. Without going into details about life expectancy, crime rates and so on, which are all mostly better than a few decades ago, our Profit and Loss and Balance Sheet Statements seem greatly improved over the last few decades. This has occurred in spite of wars, bad leaders, world illiteracy and disingenuous terrorism.

Nick Murray, in one of his missives, quotes a few exemplary numbers; at the end of an unfortunate string of economically questionable leaders (Johnson, Nixon, Ford and Carter) real GDP per capita in the US was $26,900, S&P500 earnings were $10/share and S&P500 dividends were $4.30. In 2017, those metrics were respectively: $52,000, $131 and $47. Murray’s point is if we survived those four leaders - and thrived - we shall survive this juncture as well.

The importance of those metrics cannot be understated; especially when it comes to dividends growth. If one travels back to 1935, dividends from the S&P500 have grown since at a rate of over 5% versus an average inflation rate of 3%. In consideration of the fact that for most people, the only rationale for engaging in the markets is to build a portfolio that will ensure the continuity of one’s lifestyle in the future and against the detrimental effects of inflation, the superiority of equity dividends over inflation’s destructive power is paramount.

The data we mentioned leaves us with one solid conclusion: the investing dynamic starts with a defined process and ends with a defined process. In other words, maximum importance must be given to the elements that make the foundations of a long-term plan and then discipline of execution must follow to ensure that the benefits of the plan can indeed be reaped.

The plan is key, the rest is noise.

So, what makes a plan a good plan? Every investment blueprint is different as it is tailored to the individual needs of each person but we can positively say that there are a few unavoidable good practices:

  • utilize a disciplined approach to savings, spending and investing
  • create savings checkpoints
  • properly budget your current and retirement income needs
  • put time on your side - the longer one is invested, the higher the probabilities of success
  • structure your portfolio in a diversified allocation which must be based on your personal parameters, capital market conditions and rebalancing efforts
  • while different situations may arise, withdrawal rates of 4% are generally believed to ensure longevity of invested funds.


As stated in our book “Market Faith” the following should be every investor’s blueprint:

  1. Establish your objective
  2. Clarify your time horizon
  3. Delink your emotions
  4. Visualize the process
  5. Implement
  6. Tactically defend