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Market Review June 2012

Summary: This is not the first time the world has had issues. Over time, the world has solved its issues and moved on higher. To be cowed in by those issues would have been the greater mistake. We continue to invest in high quality companies and urge you to do the same.

The greatest mistake would have been to NOT invest: A picture is worth a thousand words. We share this total return picture of the US market from 1926 onward. In the U.S. one dollar invested in 1926 grew over the years into $2,982. Through this all, mankind has surmounted numerous issues that lasted several years at a time – WWII that lasted 6 years, the high interest rate environment that lasted from 1978 through 1988, the pervasive dark empire of the Soviets that went on from 1917 through 1985, the Berlin Wall, multiple tsunamis and disasters etc. Yet we solved many of those issues, as so mankind and equity markets have climbed ever higher. As the legendary John Templeton put it, through all of these issues, the greatest mistake indeed would have been NOT to invest but to be cowed in by the issues surrounding us.

Give Europe some time: The world today is not much different – we do have issues. At the forefront is Europe: its structure, its banks, its finances. We tend to forget that the Euro as it exists today is only ten years old. It is bound to have structural issues but with time, Europeans will find solutions just the way Unites States did through its evolution. Give it some time and solutions will be found.

In the meantime, progress continues to be made on numerous fronts. Economies are managing to expand even though their overall pace is uneven and interest rates remain low. We will not solve all our problems at once but indeed we continue to take steps in that direction.

What are we doing with our own money: We continue to put our money where our mouth is and are using this opportunity to add to our long positions in stocks. We urge investors to also take a longer view of their money and think about owning high quality businesses that are likely to be around for many years to come. Investing is full of ups and downs but as history as shown, a well diversified portfolio should slowly but surely increase in value over time.

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