Found via Market Folly.
On behalf of our entire team at East Coast, I want to extend to you and your family our sincere wishes for health and prosperity in the new year. Although we would love to start the year reporting that the equity market turbulence is behind us, we are expecting volatility to persist. Continued deleveraging of the global economic system coupled with heightened political inputs will fuel fear of the unknown. Our best absolute performance years have rarely been born out of a cheery consensus, thus this prognosis may not result in anemic returns. While an emotional “all clear” sign remains elusive for investors, we are finding the environment attractive for purchasing equity of competitively entrenched businesses.
We observe a general misclassification between uncertainty and risk. Looking forward, we also anticipate the general perception of “risk” versus” risk-free” assets will change. Central bank intervention to mitigate the effects of the inevitable deleveraging cycle will raise the cost of capital and compromise the value of paper currency. We expect this could be a disappointing realization for those seeking long-term shelter in cash and bonds. We will share some insight on these observations in this year-end letter.