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A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 25, NO. 12
Sunrise Over Paris
“A walk about Paris will provide lessons in history, beauty, and in the point of life.”
—Thomas Jefferson
OUR SECOND VICE PRESIDENT
and third President was a complicated and contro-
versial statesman, but his observations on Paris seem apt given the terrorist attacks that
wracked the city on November 13—particularly his sentiment that Paris will teach us
about life. Indeed.
The terrorist attack in Paris was tragic, and if you feel as though these dramatic and
dangerous events are happening more frequently, well, they are. Days like that chaotic
Friday take their emotional toll on us, both as humans and as investors.
As investors, we need to look to history to resist the initial emotional response to do
something. The table on page 3 lists a number of what have been thought of as earth-
shattering events that have impacted our lives and portfolios, ranging from domestic
to foreign affairs and from manmade difficulties to acts of nature. (I published a more
detailed table in the October 2014 issue.) We looked at 40 such events dating to the
explosion of the
U.S.S. Maine
in 1898 and found that, on average, the Dow gained 9.5%
(not including dividends) one year after these incidents—better than the Dow’s long-term
compound growth rate of 5.1%.
With family in Paris, I was deeply concerned about the danger so close to my uncle,
aunt, cousin and his wife and child. Thankfully, all are safe, and my 90-plus-year-old
The Independent Adviser for Vanguard Investors
and FFSA are completely independent of The Vanguard Group, Inc.
MOMENTUM
October Hot Hands
MOMENTUM IS A POWERFUL FORCE
that can be transferred from one moving
object to the next with impressive results. Consider a hard-hit cue ball smacking into
its target, stopping in its place as the ball it strikes goes from zero to 20 in the blink
of an eye.
Well, momentum also works in the stock market. Stock market momentum is not as
consistent as a well-hit pool ball, but it definitely has its proponents, as well as some
time-tested strategies that take advantage of it. My longstanding calendar-year
Hot
Hands
strategy and its offshoot, the
October Hot Hands
strategy, are two of them.
As with any investment strategy, you have to take the long view. Year-to-year perfor-
mance can vary greatly, and that’s been illustrated in spades with
October Hot Hands
.
That said, long-term performance generated by investing with the winners over 12-month
DOW JONES INDUSTRIALS
November Close:
17719.92
STANDARD & POOR’S 500
November Close:
2080.41
4400
4650
4900
5150
5400
N OSA J JMAM F JD
NASDAQ COMPOSITE
November Close:
5108.67
0.00%
0.03%
0.06%
0.09%
0.12%
0.15%
0.18%
N OSA J JMAM F JD
3-MO.TREASURY BILLYIELD
November Close:
0.17%
1.6%
1.9%
2.2%
2.5%
2.8%
N OSA J JMAM F JD
10-YR.TREASURY NOTE YIELD
November Close:
2.22%
16000
16600
17200
17800
18400
N OSA J JMAM F JD
1900
1950
2000
2050
2100
2150
2200
N OSA J JMAM F JD
AVERAGEVANGUARD INVESTOR*
November:
0.1%
YTD:
1.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
NOSAJ JMAMF JD
*See the footnotes on page 2.
Model Portfolios................................................................ 2
Yield’s Gravitational Pull.................................................... 4
“Dive, Dive, Dive…”......................................................... 5
Gains Approaching............................................................ 6
Performance Review.................................................... 8-11
Rise of the Machines, and of Errors............................... 12
The Five-Year Report on U.S. Growth............................. 13
Dan’s Do-It-Now Action Recommendations.................... 16
DECEMBER 2015
SEE
PARIS
PAGE 3
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S P E C I A L E X P A N D E D 1 6 - P A G E I S S U E
>
SEE
HANDS
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