Leithner & Company Pty Ltd

Objectives & Returns

It is an irrefutable fact that in the long run it is economics that triumphs over emotion. Since 1872, the average annual real stock market return (after inflation but before intermediation costs) has been 6.5%. The real investment return generated by dividends and earnings growth has come to 6.6%. Yes, speculative return slashed investment return by more than one-half during the 1970s and then tripled (!) it during the 1980s and 1990s. But measured today, after this year’s staggering drop in stock prices, speculative return, with a net negative annual return of -0.1% during the entire 130-year period, on balance neither contributed to, nor materially detracted from, investment return. Is it wise to rely on future market returns to be enhanced by a healthy dollop of speculative return? Don’t count on it!

John C. Bogle
Don’t Count On It! The Perils of Numeracy
(18 October 2002)

Leithner & Company (LCO) has two objectives:

  • to preserve wealth – that is, to preserve the value of its shareholders’ capital by compounding it at a rate which compensates for the effects of inflation.

  • to build wealth – that is, to invest its shareholders’ capital in a portfolio of securities whose rate of return, given cautious assumptions, can reasonably be expected to exceed the returns offered by 5-year Commonwealth Government bonds. When securities capable of generating such returns are difficult to locate, as was increasingly true from the time of LCO’s formation in 1999 until the end of 2008, prudence demands that it accumulate cash – and that it continue to do so until securities become available at attractive prices.

To read the full document, click here (PDF).

Chris Leithner