Quote for the Week

As usual after a recession there are many people in Wall Street who expect further weakness in security prices. But I would like to point out how minor this question is in the light of long-term investment policy. Suppose, a 10 or 15% decline in prices from this level is a fair possibility, what sense would there be for the true investor to take that into account? In the first place, there is still a substantial chance that it won’t happen at all, and, in the second place, if it does happen, there is a still greater chance that he will put his buying orders too low and miss his market. All my experience indicates that the proper method to buy stocks for a particular purpose is to buy them at once, unless you have a definite reason to believe that the price level is too high. — Benjamin Graham (source)

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Tariffs became a larger part of the public discourse in the late 1800s following the Civil War. A search for “tariffs” in newspapers (based in Illinois) around the time shows the extent of it.

The initial bump happened in the early 1880s, peaked in 1897, picked up again in 1909, dropped off during WWI, and rose somewhat in the 1920s until it fell off during the Great Depression. The spikes coincide with Congress pushing high tariff bills, revising bills, and replacing old tariff bills with new ones.

Editorial cartoons captured it all. The political messaging, the public perception, and the reality play out over and over again. Tariffs were meant to protect American businesses, farmers, and workers. Promises of high wages and overwhelming prosperity was a recurring theme. Plus, the tariffs would generate tax revenue to help fund the government and lower the national debt.

Instead, business confidence suffered from the turmoil brought about by frequent tariff revisions. Certain businesses received more protection than others. Tariff revisions and carve outs favored big business interests first. Wages went unprotected. Higher unemployment was blamed on tariffs, whether it was a direct result or not. Of course, consumers faced higher prices and worried over the rising cost of living.

Sound familiar?

An early example shows fat monopolies feeding at the trough of taxation.

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Quote for the Week

If you’re going to seek out volatility because that’s where opportunity is, you don’t want your entire portfolio to be volatile, you only want to make volatile bets within it. You have to be sure that there’s some systematic arrangement of the bets that you make so that the portfolio risk in the total portfolio is not as volatile as the individual components. One of Markowitz’s great insights was precisely that. That you can take a lot of high-risk bets — as long as they’re not correlated — and come out fine…

As I said, the markets are macro-inefficient. They can go haywire. That is a matter that you deal with through your asset allocation in the first place, so that you don’t get killed if the totally unexpected hits you in the face…

My own affairs are run that way because I know that extreme outcomes can happen and I don’t want to get killed. But that doesn’t mean that I’m not making bets in the middle of the portfolio somewhere. — Peter Bernstein (source)

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Quote for the Week

I begin with something different from the probabilities or that range of outcomes, but really saying if I do this or I don’t do this, and I’m wrong, what are the consequences. This is a way to begin. If I decide I’m scared of the market and I don’t go in, and it goes up through the roof, how much difference is that going to make to me? Or if I do go in the market, and it goes down, what is that going to mean to me? And so — because you know it’s going to do one or the other. And what difference does it make? The first thing is to think about consequences of being wrong because all of us, every day, are faced with the possibility that the decision we make, no matter how carefully reasoned, can turn out to be wrong. And then what does that mean to me?

Often, not much. Often a whole lot. And so they kind of gray the decisions that way…

I think there’s a time when you have a kernel of securities based on optimistic expectations. By and large, the most awful things don’t happen, and then some investments on the outside to cover those extreme outcomes. This is kind of the structure that you use. I don’t think you make disaster the core of your investing because if you — that’s a very expensive decision to make if you’re wrong. — Peter Bernstein (source)

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It was a mediocre start to the year for U.S. markets then it got worse. The S&P 500 dropped 4.6% in first three months of 2025. On the bright side, international and emerging markets rose.

A diversified portfolio was likely flat over the first quarter. So not great or horrible, considering its only three months and performance over the last two years.

That changed on April 2nd. Liberation Liquidation Day started the worst selloff since March 2020. The announcement of massive widespread tariffs — an average of 24% — not seen since the 1930s wiped out any gains over the last three months and added to the losers. It’s moronic, self-inflected, and unnecessary.

If there is a lesson in all of this, it is:

1. Never underestimate the power one idiot has over the global economy.
2. Diversification matters.

The three months to start the year, and especially the last week, bring the point home. We may have little control over the idiocy of those in public office (beyond elections), but we do control how we manage that risk in our portfolios.

The point of investing is as much about protecting the money you’ve already made as it is about growing your money further. Diversification does both…and more.

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