November 2022

To Our Business Partners


In May of last year we wrote about what we saw as the folly of cryptocurrencies.  We had observed at the time that we couldn’t determine that they had any intrinsic value.  The latest debacle in this area has been the dramatic and swift bankruptcy of FTX Exchange, a crypto exchange firm. Founded in 2019, FTX had a peak valuation of $32 billion.  Today, in bankruptcy, the company has a whopping $9 billion (that’s “-illion” with a “b”) in liabilities matched with a mere $900 million in liquid assets and a large amount of other illiquid assets.

While we don’t profess to have any particular expertise about cryptocurrencies and don’t want to get too far into the weeds over what happened, certainly the overly easy money policies of the Federal Reserve (near-zero interest rates) created the environment for something like this to occur.  In other words, low-cost money led to extremely speculative activity.  Here’s what some who know far more about this subject than we do have said:

You are seeing a lot of delusion … Partly fraud and partly delusion. That’s a bad combination … This (the once multibillion dollar FTX bankruptcy filing and government investigation) is a very, very bad thing … The country did not need a currency that was good for kidnappers. There are people who think they’ve got to be on every deal that’s hot. I think that’s totally crazy. They don’t care whether it’s child prostitution or bitcoin … Good ideas, carried to wretched excess, become bad ideas … Nobody’s gonna say I got some s*** that I want to sell you. They say – it’s blockchain!

Charles Munger, Vice Chairman, Berkshire Hathaway, in an interview with CNBC

As an investment, cryptocurrencies make very little (if any) rational sense; in fact, there’s little reason to believe they are anything more than elaborate Ponzi schemes. What they do offer, however, is a strong sense of community, a feeling of intellectual superiority, hope of an easy path to financial freedom and, perhaps most importantly, the thrill and agony of wild volatility.

Jesse Felder, The Felder Report newsletter

When we asked tough factual questions that were not answered satisfactorily, it really didn’t take much to see that there wasn’t much to that ‘vision’ other than hope, smoke, and the desire to make a quick buck (in fact, lots and lots of bucks).

Dennis Kelleher, CEO, BetterMarkets, a venture capital firm which turned down an offer to invest in FTX

Yet there were many other firms and individuals that invested enormous sums in FTX and cryptocurrencies in general, apparently having done very little homework and due diligence. This is a common phenomenon amid a speculative frenzy.  As we’ve said many times, we prefer to invest in companies that generate actual profits by producing tangible goods and services of worth and, importantly, are selling at attractive valuation levels.


The stock market rally has taken the PRICE of our group* of widely owned stocks up to 82% of estimated VALUE. Our aim is to combine sales of overvalued stocks with additions of undervalued stocks to improve the long-term upside potential of our list.  Lower prices on our closely watched stocks not yet in the portfolio would be most welcome!


Stock market indexes staged a recovery after two consecutive months of declines.  The gains were significant, with the Dow Jones Industrials up nearly 14%, followed by gains of 11-12% from most of the other indexes. The NASDAQ and the S&P 500 lagged their peers with gains of about 4% and 8%, respectively.  For the year to date, stocks are still under water, with the NASDAQ down 30%, and the other indexes down 10-18%.  Stocks are also down over the last twelve months, ranging from a 29% decline in the NASDAQ to a 9% decline in the less diverse Dow.  We’re happy to report that the performance of our group of portfolio stocks*, thanks to a few big winners, is positive over the last one and twelve months, and down only a bit year-to-date.


Steve Nichols, CFA • Bill Warnke, CFA •  Andy Ramer, CFA

*The group of “portfolio stocks” — our Equity Composite for the purpose of evaluating investment performance — consists of 19 stocks that are held in our clients’ accounts. Portfolios might hold some or all of these stocks, depending on investment guidelines unique to each client, the timing of purchases and sales, and start dates of accounts. The performance of this group of stocks is a good proxy for our equity performance but might vary widely among accounts. Of course, past performance is not necessarily indicative of future results.

We hereby offer to deliver to you without charge a copy of our current Form ADV Part 2, in accordance with the U.S. Securities and Exchange Commission’s “Brochure Rule.” Please contact us if you would like us to send you a copy.