Lots of very interesting numbers there. Unfortunately it is too US centered, but after all, Sequoia is a US Company. What’s interesting is that we are coming back to some down to earth, cash is king, good old fashioned obvious advices. Always good to come back to the basics. The real difficulties will be to weather the storms ahead, learn from our mistakes, and try to stick to those obvious advices in the future.

Fortunately, one of the most valuable lessons of my career came in the early 1970s, when I learned about the three stages of a bull market:

1. When a few forward-looking people begin to believe things will get better,
2. When most investors realize improvement is actually underway, and
3. When everyone’s sure things will get better forever.

To aid in your consideration of the future, I’ve formulated the converse of the above, the three stages of a bear market:

1. When just a few prudent investors recognize that, despite the prevailing bullishness, things won’t always be rosy
2. When most investors recognize things are deteriorating
3. When everyone’s convinced things can only get worse

We surely are not in a bull market right now. If I were to guess where we are, I would say in the second phase of a bearish market. Which in my view is good – time to start searching for cheap but fundamentally sound markets !

After a painful period, investors face a stark choice

OWNERS of risky assets suffered agonies in the first three months of the year. Almost without exception, stockmarkets lost ground while the price of corporate debt fell sharply (or to put it another way, spreads widened). Only those who bought the unlikely combination of government bonds and commodities will be looking fondly at their portfolios.

For dollar-based investors, it did not matter much what kind of equities they owned. The MSCI World index was down 9.5%, the American market 9.9%, Europe 9.2% and emerging markets 11.3%. The supposedly uncorrelated Tokyo market (it has tended to go down when others went up) decided to become correlated again at the least helpful moment, dropping 7.7% in dollar terms. And even those numbers are flattered by the decline of the greenback; in local currency, Japan was down 17.8% and Europe 16.2%.

“Be greedy when others are fearful” is one of Warren Buffett’s aphorisms and it is possible that this is one of those times. After all, most people are convinced that the American economy is in recession, and sentiment is depressed. The demise of Bear Stearns could mark the bottom of the crisis, and the cavalry are finally on their way: the Federal Reserve and the American Treasury are supplying both a monetary and a fiscal stimulus.

Read more by following this link.

So when I received this very simple and straight forward summary in a Credit Suisse article recently & wanted to share it here.

Money before Money
The use of proto-money may date back to at least 100,000 years ago with the use of Shell or red Auchre.

Payments in Precious Metals
The Code of Hammurabi in Babylonia includes laws governing banking operations. It describes payments in weighted amounts of silver around 1780 B.C.

Coins
The first coins are produced in Lydia (in Asia Minor) around 650 B.C. They were composed of a mixture of gold and silver (electrum be the geek term).

Derivatives
Aristotle mentions the use of a call option-like agreement with olive presses in his writings dating back to around 300 B.C. By deduction – Philosophs love deductions – we can assume that option-like agreements were common in ancient Greece.

Bank Notes
Chinese were the first to use bank notes. We have a first record mentioning a note from 1024. Swedesh were the first European to issue bank notes through the private company Stockholm Banco in 1661.

Bonds
The earliest-known bond was issued by the Bank of Venice in 1157 to fund a war with Constantinople.

Commodity Futures
Merchants began to finance their trading expeditions by selling goods they expected to receive before actually possessing them during the Renaissance.

Shares
The Dutch East India Company, founded in 1602, issued the first negotiable share certificates in 1606. These were traded on the Amsterdam stock exchange.

Financial Futures
The first financial futures contracts were traded in 1972. Their popularity surged with the abandonment of fixed exchange rates in the ’70s.

E-payments
Electronic payments exceeded cash transactions in the US in 2003.

By the way – the scientific study of money and its history is called Numismatics. To your surprise, I’m sure you know some Numismaticians. All coins collectors are considered Numismaticians

What is Cost- Averaging?

Aside from its complicated term, it actually is a very simple investment method. To cost-average, you simply have to invest the same amount, on a regular schedule, in the same kind of investment – usually on a monthly schedule in mutual funds. That way, you eliminate the market fluctuation by buying more shares when the market are down, and fewer when they are up. You increase your portfolio value, while reducing risk thanks to the averaging of its volatility.

Who is it for?

This method is great for passive investors. You just have to pick a few funds with different strategies, allocate a specific amount each month, there you go! You can check that your portfolio strategy is still working as you want it to every 4 to 6 months if you want – or you can just sit back & enjoy the ride. The only real drawback is that you you need to invest on a regular basis – and have the guts to stick to your strategy even when the markets are down.

If you want to read a more thorough analysis of Cost Averaging, I highly recommend the following one: Sigma Investing on Cost Averaging