"Oh man! Are you kidding me?"
That was our response to one of the most difficult questions EVER posed to us.
A question that forced us to dig deep into our souls. A question that forced us to tap into the dark and mystic areas of our minds and hearts where we rarely tread. A question so mentally and emotionally taxing it forced us to bring to bear all of our collective experience as rational individuals interacting in an everchanging but harsh world:
"Name the best three songs in a row on an album that is not a compilation."
Oh man! Are you kidding me?
We dare you to try to answer it! Two songs in a row is easy but trying to find three truly definitively great songs in a row is akin to finding the Holy Grail. Go ahead, search the greats (Exile on Main St., Led Zeppelin IV, Sgt Pepper’s Lonely Heart Club Band, Nevermind, London Calling, Highway 61 Revisited, Master of Puppets, Born to Run…). Search them all. You will go mad before you come up with the best three in a row.
Another hard question frequently posed to us lately is: "Given the increase in volatility, when will this bull market end?" For us the answer is easy: "We have no idea."
That said, over the course of market history, bull markets end and bear markets begin when recessions set in. Today we still see a very low probability of recession over the next 12 months. Of course, market corrections can happen at any time. The most recent correction occurred in early February.
It is important to note that trying to predict the future and call future market moves is a fool's errand, and, more importantly, not a part of our investment process.
Whether a recession happens or not is somewhat immaterial, from a portfolio perspective at least. That is because our portfolio construction approach is built around diversified asset allocation — owning a number of different, non-correlated investments. Some investments will zig while others zag. Some investments will outperform the diversified portfolio as a whole, and some will underperform by definition.
Below is our "Periodic Table of Five-Year Investment Returns." Each column is a calendar year going back to 2008, and each square represents the trailing five-year return at the end of the calendar year for a particular asset class investment:
Again, let us say this one more time: you will notice some investments outperform and some underperform the "diversified portfolio" return (green boxes). This is a feature, not a flaw, of our investment approach. Like trying to find three fantastic songs in a row, predicting which investments will outperform and which will underperform is just about impossible.
We can't do it* (and no one can).
So we create our own unique playlists of our favorite songs on Spotify and own a diversified portfolio that is poised to provide decent returns over the long-term.
* While we still aren’t convinced it can be done, below is our best shot at the “best 3 songs” challenge (so far):
Beatles, Abbey Road:
1. “Golden Slumbers”
2. “Carry That Weight”
3. “The End”
Radiohead, OK Computer:
1. “Exit Music (For a Film)”
2. “Let Down”
3. “Karma Police”
Michael Jackson, Thriller:
2. “Beat It”
3. “Billie Jean”
U2, Joshua Tree:
1. “Where the Streets Have No Name”
2. “I Still Haven’t Found What I’m Looking For”
3. “With or Without You”
Led Zeppelin, Led Zeppelin II:
2. “Living Loving Maid (She’s Just a Woman)”
3. “Ramble On”
It’s a maddening exercise, but if you think you have worthy contenders, send your list to us via firstname.lastname@example.org!