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1Q19 Quarterly Letter




The 1st quarter of 2019 provides an interesting comparison to the 4th quarter in 2018.  One of the very best 1st quarters in history proceeded by one of the very worst 4th quarters. 

Before I launched Curran Wealth Management as an independent investment advisory firm, I worked in a number of positions in only two firms.  One no longer exists.  First Albany Corp “disappeared” over time beginning with the sale of their “retail” business in 2001.  I was part of the “retail” which was sold to First Union Securities.   First Union was transitioned and transformed by a number of mergers and acquisitions and today is known as Wells Fargo Advisors.  

I have learned so much over my career that spans time touching on six decades.   My plan is to make it well beyond six.   So January 1, 2020 will allow me to say SEVEN decades.

But the most important lesson I learned about investing came to me when I was a Fels Fellow at the University of Pennsylvania’s Wharton School.

My fellowship required me to work in state or local government.  The first phase included an internship in a townships manager’s office in Pennsylvania.  The second involved a study of three small boroughs in Delaware County, Pennsylvania.  After I graduated the third was a paid position in East Windsor, Connecticut.  

My title was Assistant Town Manager.  Before I actually reported there was an election that almost certainly meant my job was in jeopardy because the “other” party won.

My “moral commitment” for having accepted the Fels Fellowship still had a string attached.  I was required to work in state or local government after graduation for a period not less than one year.

Nelson Rockefeller was the New York State Governor at the time.  He was committed to transforming government into being more business efficient.  It made sense to me so instead of East Windsor my wife and I went to Albany.  My service in government lasted the year I committed to Fels plus a few more months.

Until I was employed by New York State all my previous work in government was unpaid. My first experience with bureaucracy was the rate I was to be compensated.  My moral commitment restricted me to making no more than $5,800.  New York did not have a salary grade paying $5,800.  The position I was to assume paid about $6,800.   I was propositioned to accept $6,800 because the paper work required to make me morally uncorrupt was overwhelming in the words of the HR person handling my application.  I won!  I guess I was still morally pure at least as far as Fels was concerned.

If you are curious about Fels, you may recall Fels-Naphtha soap.   It was the source of funds for the Fels program.

After a little more than one year I decided government was not a career I wanted to pursue longer than my commitment.

So I moved on to the private sector.  Like my first job in government my first one in the private sector was cancelled before I arrived. The name of the firm was Hayden Stone.  I dealt with this set back by going back to my former job in New York State.  

The job reopened and I joined Hayden Stone.  About 18 months later Hayden Stone was declared insolvent.  The New York stock Exchange arranged a merger with a firm called Cogan Berlin Weill and Leavitt [CBWL].  Interestingly the deal was for CBWL to acquire all of the assets and none of the liabilities of Hayden stone.   That was a very sweet deal. It was 1971.  Even more interesting to me is the last firm where I worked, Wells Fargo Advisors, has roots that include CBWL.

Finally I am coming to my point.  My early conclusion was my career in government and the private sector did not work very well for me.  I think you would agree.

While I was doing one of my unpaid internships while attending Wharton I visited a brokerage firm in Media, PA.  There I was shown a chart that showed how much $10,000 would have grown since 1928.

Here it is.

And this is what it looks like from 1969 to the present.  

Fortunately I acted on one part of my life I can control and that is investing for the long run. In spite of all the calamities and travesties that occurred over those years, it was possible to grow very wealthy.  However, it is simply too easy and humanlike to allow worry and procrastination to ruin our opportunities to grow wealthy.   Whatever the reason most people simply do not take advantage of the magic in compounding investment returns. 

Today, like most previous times in our history, news and events erode confidence.

In 1968 I became aware of how dynamic the stock market was because the American economy was reflected in the growth of stocks.

What I “learned” from my family was how risky investments could be and how unreliable they found them to be.  They cited the Great Depression, World War II and Hitler, the atomic bomb and the Korean War. I knew firsthand about Vietnam.

But I said, “Look at the facts as they are in terms of the stock market.” 

 Fortunately I did not take their advice. So from 1929 to the day of epiphany in my life, the hypothetical $10,000 invested in 1927 grew to about $365,000.  The annual rate of return was 9.17%. The period included 42 years.

    “Everyone is entitled to his own opinion, but not to his own facts.”  Daniel Patrick Moynihan

Now look at the period since 1969. Vietnam raged on.  Interest rates were in the teens and not surprisingly we had double digit inflation rates.  Nixon was impeached.  Home interest rates reached mid-teens.  New York City defaulted on their debt.  There was the savings and loan crisis along with government bailouts to include Chrysler among others.  We endured 9/11 and the financial crisis.  Still the market went up.

Indeed it did.  From 1969 to 2018 [49 years] the S&P 500 increased at an annual rate of 10.22%. The sum of $10,000 grew to almost $1,200,000.  

So if I shrug my shoulders when I hear about how bad things are today, please excuse me.  The most important lesson I learned as a young man was to believe in the long run and persevere in the short run.  Remain optimistic and take nothing for granted.

When I graduated from Wharton in 1968, there were 33 Fels fellows. There was one woman and one black man.  The rest were all white men.

The world has indeed changed I believe the stock market is basically the same.   My assessment and conclusion is: believe and act on the long run.  Work to daily improve all we do in the short run but never forget the real benefits can only be understood and experienced in the long run.

Hypothetically, if the next 50 years reflect the past 90 years in terms of rate of growth, the result will be equal to about 10% annualized growth rates in the markets.  Measuring returns in the short run will prove fruitless and dysfunctional as they have always proven to be.  When too much emphasis is placed on the shorter term all that is seen are catastrophes and periods of major disappointment like the Great Depression and the Great Recession. By the way if the next 50 years is like the previous 91, $10,000 growing 10% annually will be worth about $1,173,908.

More astonishingly the original $10,000 invested in 1927 would be worth about $6.9 Billion in 2068.  Maybe it is the reason I pick up pennies.  While it may seem funny, I see future value even in a single penny.

My advice to parents and grandparents is to try to never permit your children and grandchildren to be ignorant of benefits gained by acting on what we know about the long term.  

The alternative is to be caught up in the turmoil of the short term where there are few, if any, lasting rewards.

Our advice remains unchanged. Buy stocks for long term appreciation and be wary of fixed income.  We believe the value in short term fixed income securities remain important in diversification strategies as a hedge against stock market declines.  We see high risk in maturities exceeding 10 years. Low nominal rates are likely to increase but real returns, adjusted for inflation, may decline even if rates were to increase.


Thomas J. Curran                              Kevin T. Curran, CFA

Chief Executive Officer & Founder     CIO & Portfolio Manager  

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This material was prepared by or obtained from sources that CIM believes to be reliable, but CIM does not guarantee its accuracy. The securities identified do not represent all of the securities purchased, sold or recommended and the reader should not assume that any listed security was or will be profitable. Market indices referenced are unmanaged and representative of large and small domestic and international stocks and bonds, each with unique risks. Information about them is provided to illustrate market trends and does not represent the performance of any specific investment. You cannot invest directly in an index. Past performance cannot guarantee future results.