Dear Investors Summary and Analysis

"Long-Term earned 28 percent in 1994, its first year of operation. After fees to the partners, its investors' accounts rose by 20 percent. In a year in which the average investor in bonds had lost money, this was nothing short of phenomenal. In October, when it was clear that the fund would finish with impressive numbers, Meriwether warned his investors not to count on a repeat. Long-Term would very likely have years in which it lost money, J.M. stressed: 'It is clear that significant losses can occur even over a one-year horizon.' All good money managers write such letters. If they understand their business, they know they can have bad years. If they are honest, they let their investors know it or at least try to temper their expectations" (Chap. 4, p. 61).

In the letter, Meriwether even calculated the odds of...