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Client Update - 1st December 2023

Good investment strategy requires patience, so it seems apt that this week I start by remembering the late Charles Munger of Berkshire Hathaway. Known as the "Oracle of Pasadena", Munger's journey from earning 20 cents an hour during the Great Depression to becoming an icon in the investment world is a tale of perseverance, intellect, and insight. His partnership with Warren Buffett shaped the course of modern investing, and his legacy is etched in the principles of buying low and selling high and enhanced corporate ethics. Munger's success was about more than just choosing stocks; it was about understanding economics, human behaviour, and business. Munger's ethos of patience and rigorous analysis of any investment he might make is a cornerstone of how we look after our clients’ portfolios.


I have written at length in the last year about inflation and its impact on client portfolios. This week in Europe, a region recently struggling with economic issues, there has been an unexpected positive change: a decrease in Eurozone inflation. This drop is significant, given the relentless grip high inflation had over the past two years. Notably countries like Belgium are seeing some of the lowest annual inflation rates in the Eurozone. This shift is crucial as it may signal the beginning of a much-needed economic respite for the continent, especially as the European Commission's Autumn Forecast brings a sobering perspective, indicating that while inflation has dipped below 3%, growth remains slow. This suggests cautious optimism that Europe might be stepping back from the brink of high inflation.


Last week I expressed our interest in the recovery of the bond market and the story in November remains one of a continued decline in bond yields, resulting in capital growth of around 5% - this backs our investment teams recent increase in exposure to this asset class. U.S. Treasury yields, particularly the benchmark 10-year note, have been on a downward trajectory since breaching the 5%-mark last month as markets start to believe the next move by central bankers will be a long hold, followed by a cut in rates, not a further rise. This shift is indicative of broader market sentiment seeking safety amidst geopolitical tensions and economic uncertainties.


As we consider these trends, it is essential to channel Munger's approach to investing: a blend of strategic foresight, strong ethics, and an unyielding commitment to long-term value. His perspective was never about rapid gains but about the deeper understanding of market fundamentals and the patience to wait for the right opportunity. In these fluctuating times, the essence of Munger's philosophy becomes increasingly relevant. He reminded us that investing is not just about numbers and charts; it is about understanding the world and a company’s place in it.


He often signed off his meetings at Berkshire Hathway as we like to, wishing his staff and listeners a good weekend. This was a reminder from Charlie to enjoy life amidst the hustle and bustle of the financial world. Sensible advice from one of the best.

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