Rational Investing: 2003 predictions served up for proper review

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Clark Davis is a 34-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money-management company.|ret||ret||tab|

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Think of it as a Clint Eastwood movie: Time for the good, the bad, and the ugly, in which the recommendations and comments found in this column during the past year are reviewed and graded.|ret||ret||tab|

Here's what I said would happen:|ret||ret||tab|

January '03 column:|ret||ret||tab|

"Interest rates are not expected to increase significantly over the near term; however the appreciation ... of the past year is not likely to be repeated. That should produce a total return in high-yield issues (junk bonds) that is significantly better than that of treasury bonds." |ret||ret||tab|

Junk bonds returned over 28 percent this past year, more than four times the 6.1 percent return of "A" rated bonds. Grade? How about an A+?|ret||ret||tab|

Tax legislation:|ret||ret||tab|

"Bush will not get the full 100 percent elimination of double taxation of dividends. Compromise with the liberals will probably result in a lesser break, possibly phased in over several years. (With) tax cuts the stock markets will improve quickly."|ret||ret||tab|

So-so on this one. Got the market moving quickly part right, but saying that Bush wouldn't get the whole double taxation elimination was a no-brainer, since we all knew the liberals would fight him until a compromise was reached. No more than a B on this prognostication.|ret||ret||tab|

Expected range of returns:|ret||ret||tab|

"Think 5 percent to 6 percent appreciation, but that is for the broad market. With good individual selection and attractive yields on many stocks, portfolios could exceed that level."|ret||ret||tab|

Not even close on this one, as the broad market blew by that range. When we miss we prefer to miss on the side of being conservative, but this one was way off target. How about a gentleman's C for calling the right direction, but the wrong magnitude?|ret||ret||tab|

March '03 column|ret||ret||tab|

"We are staying with our basic investment philosophy and maintaining portfolios of issues that encompass the full range of asset classes Examples of some of the common stock issues we hold for our clients (and ourselves) as of the date of this writing are: Chico's FAS (19.87), Borders (14.90), Home Depot (25.27), General Electric (26.06), Washington Mutual (34.67), Citigroup (35.17), ACE Limited (28.98), Best Buy (29.28), Pfizer (31.27), and IBM (81.09)." (Note: Prices not in the original column have been added.)|ret||ret||tab|

Not bad, not bad at all. That group of stocks, representative of the kind of issues we owned, but not a recommended portfolio, provided individual issue returns ranging from a low of 12.2 percent to a high of 88.5 percent. The equal weighted appreciation for the group through Dec. 30 was 41.18 percent, excluding dividends.|ret||ret||tab|

Whadda ya think? Maybe an A or even an A+?|ret||ret||tab|

April '03 column|ret||ret||tab|

"The worst is behind us. For those who hadn't experienced a bear market before, it was a gut-wrencher. For those of us who went through the anguish of 73-'74 it was certainly not pleasant, but it was mitigated by the knowledge of the financial success that followed that earlier bear market."|ret||ret||tab|

Spot on! The Dow Jones Industrial Average was at 8,484.99 when the column was submitted. We give ourselves a B+. It would have been an A+ if we had called it a month earlier.|ret||ret||tab|

November '03 column|ret||ret||tab|

"With the lid off the Pandora's box of mutual fund practices, Jimmy can expect to read about what happens in the real world of mutual-fund investing. Probable additional subjects of investigative reporting (are) ... soft-dollar payments expense ratios management fees 12b1 fees in-house funds and transaction costs."|ret||ret||tab|

For alerting you at the beginning of what will likely be a long drawn-out, media over-worked, and politicized expose of the mutual fund problems, we will give ourselves an A. We also expect that many investors will become disillusioned with mutual funds and begin shifting monies into managed accounts and exchange traded funds in 2004. More about that next month. |ret||ret||tab|

It's an election year, so expect spin from both parties on every economic and social issue to steadily increase as we approach November. And, of course, watch network news (if you must) with the eyes and ears of a skeptic. Don't let the cacophony of negative media reporting detract from the positives that are all around us. |ret||ret||tab|

As in the past, please let me hear from you as early in the year as possible if you wish me to speak before your club or organization. There is no charge, but I will be limiting the number of appearances. I will be coming to Springfield in 2004, so please contact me if you have an interest or wish additional information about the subject matter of the presentations.|ret||ret||tab|

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