The end of 2009

A year ago at this time we wrote a blog post entitled "Taking stock of 2008." It is worth revisiting because the issues we discussed then are still swirling around as pundits from all directions take stock of 2009.

We believe that the events of 2009 have borne out the interpretation we offered back in 2008. Back then we said that the "spectacular implosion of Wall Street" could well have been avoided if the government had removed the mark-to-market rule, which we had discussed all the way back in March of 2008 before the collapse of Bear Stearns.

As we would later see, when Congress finally forced the revision of mark-to-market during the first half of March this year, the recovery was rapid and impressive. It has been so impressive, in fact, that many are now saying that the markets have come "too far, too fast" -- but we would challenge that view by asking "too far from what?" In other words, we would point out that the panic-induced lows of early March, 2009 were an extremely abnormal situation, and it is very much appropriate for prices to rebound rapidly from the ridiculously low levels that they had reached.

Another important point to note is that we stated way back in September of 2008 our concern that, as a result of the financial panic (which could have been avoided, but wasn't), "government will become even more emboldened to interfere with the free-market system, just as they did after 1907." This observation has certainly come to pass.

Throughout 2009, we have published our view that TARP and the other extraordinary measures enacted at the beginning of the crisis should now be dismantled. One of the earlier posts on this subject, still relevant today, was April's "Four-letter government words."

Finally, our post from a year ago ended with this exhortation: "At the end of 2008, our most important piece of advice to investors is exactly the same as it was at the beginning of 2008: entrust your long-term financial well-being to the ownership of well-run businesses that are positioned in front of substantial opportunities for future growth." Those words turned out to be good advice, as the innovative companies we owned for our clients performed very well throughout the year, handily outpacing the broader markets for the second year in a row.

We would offer the exact same advice to investors as 2009 draws to a close.

Happy New Year!

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