“Bubba-licious”
Sunday April 8th was an epic day for Southerners, and in particular University of Georgia fans, as a native of Bagdad, Florida and UGA graduate, Bubba Watson won the Masters Tournament. Similar to the equity market in the first quarter, everything seemed to be aligned perfectly: putts were rolling in, iron shots from pine needles landed on the green and the gallery was electric. If only Sunday’s euphoria could continue unabated for the rest of the year. Right now the performance of the first quarter makes us all feel like donning “Green Jackets” but three months ago the market was more of a deflated bubble if anything. The question now is if this market is “Bubble-licious” or “Bubba-licious”. Is all of this a one-hit wonder or is it the beginning of something positive?
The “electric” feeling within the market has lead to very exciting returns for the first quarter of 2012. The S&P 500 was up 12.54% for the first quarter. The foreign market as evidenced by the MSCI EAFE Index was up 9.97%. The small cap market (Russell 2000 Index) was also up 12.44%. Many of our aggressive funds that underperformed last year are up significantly this year such as Ivy Asset Strategy up 14.34%, Harbor International up 14.41%, Artisan Mid Cap Growth up 20.83%, etc… However, keeping with the golf metaphor, we are still worried about bunkers and sand traps in this economy such as debt levels, Eurozone issues, unemployment, inflation, etc…
On that note, the fixed income market has performed soundly. Hints of inflation have rustled through the masses but it has not reared its ugly head yet. In golf the old saying goes “Drive for show and putt for dough.” The short game of chipping and putting is similar to inflation, in our mind. A few extra shots here and there start to add up and before you know it your margin of error has disappeared. Interest rates have inched up a little in the first quarter from 1.80% on the ten year Treasury up to 2.37% before ending the quarter at 2.21%. We, of course, continue to focus on our short game by keeping the duration and maturity short on our bonds while we await inflation’s impending rise.
On the investment side, we continue to play a more conservative game. We focus more on staying in the fairway to try and perform consistently versus going for broke and landing out-of-bounds. We understand that hooks out of the rough or shots between trees can be invigorating. However, we are more focused on prudence when it comes to managing our rounds of investments. Downside risk, or “bogeys” in golf-speak, are hard to erase and many of our managers employ several tactics and strategies designed to keep us out of trouble. We continue to think our managers will allow us to earn a competitive rate of return whether the surrounding conditions are good or bad. We hope the conditions remain as positive as the first quarter but we are cautious when it comes to overly rosy forecasts. By the same token, we are typically optimistic when the market is very negative. Maintaining an even keel is important in our mind if one wants to turn in consistent results.
Hopefully there are not too many golf metaphors in this quarterly missive but we felt the situation called for it. It is not too often that a “Bubba” from the University of Georgia stands so prominently on the global stage. (Not to be forgotten, Matt Kuchar, a Georgia Tech graduate also finished in the top five at this year’s Masters.) Thus, golf seemed an appropriate background for investment discussions. If the golf metaphors were too arcane, then please call with questions and we will try to find another sports metaphor to use. However, please don’t ask us to draw parallels using Mike Bobo, UGA football coordinator, or Paul Johnson, Georgia Tech head coach as even we can’t explain why they do what they do.
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Statements made via this letter are the opinions of Creative Financial Group (“CFG”) and its advisors, and are not to be construed as guarantees, warranties or predictions of future events, portfolio allocations, portfolio results, investment returns, or other outcomes. None of the information contained is intended as a solicitation or offer to purchase or sell a specific security, mutual fund, bond, or any other investment. Readers should not assume that the considerations, suggestions, or recommendations will be profitable, suitable to their circumstances or that future investment and/or portfolio performance will be profitable or favorable. Past performance of indices, mutual funds, or actual portfolios does not guarantee future results. Future results may differ significantly from the past due to materially different economic and
market conditions; investments in securities or other financial products involve risk and the possibility of loss, including a permanent loss of principal. Investments are not FDIC insured and have no bank guarantee.
Creative Financial Group (“CFG”) is a division of Synovus Securities, Inc (“SSI”), member FINRA/SIPC. Prior to January 1, 2011, CFG was a separate registered investment adviser affiliate of SSI. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank.
Investment products and services provided by Synovus are offered through Synovus Securities, Inc, Synovus Trust Company, N.A., GLOBALT, Inc. and Creative Financial Group. The registered broker-dealer offering brokerage products for Synovus is Synovus Securities, Inc., member FINRA/SIPC. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank.
The U.S. Securities and Exchange Commission adopted new oversight rules designed to help and protect all investors. These rules generally reflect a reaction to the Madoff and custody scandals, but they do require that we, like all investment firms, adopt new policies and procedures related to verification of your accounts. As such, we request that you take time to compare your account balances and statements from NFS and to contact us if you do not receive those quarterly statements and/or that the values are materially different.”
Cost basis reporting
If you buy and sell a security in a taxable account on or after the effective date, NFS will report cost basis for the sold security to you and the IRS on Form 1099-B. If you have a mix of covered and uncovered positions in the same security, NFS will report cost basis to you and the IRS for any covered position that is sold. NFS will apply the FIFO (First In, First Out) default method unless you inform us of a different method. Your cost basis method for all transactions must be final by settlement date. If you choose to change the default method, you can do so by notifying your Financial Consultant.
Use of Indexes
The investment return and style information and comparisons employ a variety of popular indices, and the index contents and strategies are the property of their respective companies (e.g., Dow Jones, Standard & Poor’s, Morningstar, Barclay Capital, Russell, Morningstar). Although the data is believed to be reliable, CFG makes no warranty with respect to the contents, accuracy, completeness, timeliness, suitability, or reliability of the information, which is represented here for informational use only and should not be considered investment advice or recommendation. None of the indices can be invested directly, and the return figures for these various securities indices are reported without management fees, trading costs, or other expenses subtracted from the returns, and are shown on a total return basis that assumes reinvestment of applicable capital gains and dividends. Components of indices may change over time. Small capitalization stocks are represented by the Russell 2000 Index. Mid Capitalization stocks are represented by the S&P Mid Cap 400 Index. Foreign stocks are represented by the MSCI EAFE Index and emerging markets are represented by the MSCI Emerging Markets Index.
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Creative Financial Group (“CFG”) is a division of Synovus Securities, Inc (“SSI”), member FINRA/SIPC. Prior to January 1, 2011, CFG was a separate registered investment adviser affiliate of SSI. Investment products and services are not FDIC insured, are not deposits of or other obligations of Synovus Bank, are not guaranteed by Synovus Bank and involve investment risk, including possible loss of principal amount invested. Synovus Securities, Inc. is a subsidiary of Synovus Financial Corp and an affiliate of Synovus Bank. You can obtain more information about Synovus Securities, Inc. and its Registered Representatives by accessing BrokerCheck