2008 has been one of the most challenging years I have witnessed during my 14 years in the investment business. We have been here before and we have always recovered and eventually enjoyed new periods of prosperity. The U.S. and world economies are resilient, and that has not changed.
For many investors, though, this bear market feels different. In fact, every bear market is different, but having lived through past market downturns has given me some added perspective. In 1973–1974, the Standard & Poor’s 500SM Composite Index declined for 21 months and some wondered if we would ever recover. In the early 1980s, short-term interest rates exceeded 20 percent, inflation was in the teens, and the market lost 27 percent. In 1987, the market lost 20 percent in a single day. Earlier this century, the tech bubble burst and the S&P 500 lost 49 percent while the Nasdaq® Composite Index lost 78 percent.
Keeping a long-term perspective doesn’t make it easier to live through the current downturn, but it does reinforce my conviction that we will get through it. Already, governments around the world essentially have said, “We’re going to do whatever it takes to get this system running smoothly again.” But it will take time for stimulus packages to have an impact. After all, when you oil a bicycle chain, you’ve got to roll it around a few times to spread the oil out and get things running smoothly.
Over the past several months, friends, neighbors and even casual acquaintances have asked me the same two questions about the current financial situation. First, they want to know, “What happened?” Many pundits in the financial press have declared that new products, such as credit default swaps, collateralized debt obligations and special investment vehicles, were the culprits. My view is more basic. I think we got in this mess because the market fundamentally risk. Too many financial firms and corporations either mismanaged their risks or simply didn’t understand how much risk they were taking. Too many institutions ended up with too many obligations that they couldn’t meet.
I noted at the beginning of this letter that 2008 has been one of the most challenging years in my experience, and I wish I could assure our shareholders that this downturn will end tomorrow or next week. But one of the most important lessons I’ve learned over the past 14 years of market cycles is that no one rings a bell signaling the top of a market and no one rings a bell at the bottom. While I don’t know when we’ll reach the low point, or if we’re already past it, I do know that the market will eventually recover and investors who stay the course will be better positioned to participate in the market’s eventual recovery.
In closing, I want to thank our investors for their patience and continued trust in our organization in these challenging times. I urge our investors to continue to work closely with their financial advisers, to keep a long-term view and to maintain a well-diversified portfolio. These three simple ingredients are key to long-term success in meeting one’s financial goals.
Pirex Fund would like to wish you Merry Christmas and a Happy New Year.
Cordially
David Esdin
Chairman and CEO
Chief Investment Officer
2008 has been one of the most challenging years I have witnessed during my 14 years in the investment business. We have been here before and we have always recovered and eventually enjoyed new periods of prosperity. The U.S. and world economies are resilient, and that has not changed.
For many investors, though, this bear market feels different. In fact, every bear market is different, but having lived through past market downturns has given me some added perspective. In 1973–1974, the Standard & Poor’s 500SM Composite Index declined for 21 months and some wondered if we would ever recover. In the early 1980s, short-term interest rates exceeded 20 percent, inflation was in the teens, and the market lost 27 percent. In 1987, the market lost 20 percent in a single day. Earlier this century, the tech bubble burst and the S&P 500 lost 49 percent while the Nasdaq® Composite Index lost 78 percent.
Keeping a long-term perspective doesn’t make it easier to live through the current downturn, but it does reinforce my conviction that we will get through it. Already, governments around the world essentially have said, “We’re going to do whatever it takes to get this system running smoothly again.” But it will take time for stimulus packages to have an impact. After all, when you oil a bicycle chain, you’ve got to roll it around a few times to spread the oil out and get things running smoothly.
Over the past several months, friends, neighbors and even casual acquaintances have asked me the same two questions about the current financial situation. First, they want to know, “What happened?” Many pundits in the financial press have declared that new products, such as credit default swaps, collateralized debt obligations and special investment vehicles, were the culprits. My view is more basic. I think we got in this mess because the market fundamentally risk. Too many financial firms and corporations either mismanaged their risks or simply didn’t understand how much risk they were taking. Too many institutions ended up with too many obligations that they couldn’t meet.
I noted at the beginning of this letter that 2008 has been one of the most challenging years in my experience, and I wish I could assure our shareholders that this downturn will end tomorrow or next week. But one of the most important lessons I’ve learned over the past 14 years of market cycles is that no one rings a bell signaling the top of a market and no one rings a bell at the bottom. While I don’t know when we’ll reach the low point, or if we’re already past it, I do know that the market will eventually recover and investors who stay the course will be better positioned to participate in the market’s eventual recovery.
In closing, I want to thank our investors for their patience and continued trust in our organization in these challenging times. I urge our investors to continue to work closely with their financial advisers, to keep a long-term view and to maintain a well-diversified portfolio. These three simple ingredients are key to long-term success in meeting one’s financial goals.
Pirex Fund would like to wish you Merry Christmas and a Happy New Year.
Cordially
David Esdin
Chairman and CEO
Chief Investment Officer
__________________
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