Tailgating
The American Tailgaters Association (surprisingly, an actual group) cites the first tailgate as occurring in 1861 during the Battle of Bull Run. At this inaugural tailgate, “fans” packed baskets of food and watched the battle hoping to cheer on their side to victory. Spoiler: the gray team won that match, but the blue team won the title. Tailgating has evolved a great deal in the 155 years since. Why do we bring this up? Because autumn is in the air: The smell of flame roasted beef, the roar of 90,000 college football fans and the touch of a cool breeze brings in one of the best seasons around… “Tailgating season”, a.k.a., fall.
If you have ever attended a tailgate, it is evident that not all tailgates are created equal. We mention this because setting up a good spot to grill out and entertain is sort of like “Fundamental Value” investing. Putting basics in place like lump charcoal, damp mesquite logs, and a 60 gallon smoker in contrast to showing up with chicken tenders, loud music, and cold beer parallels the contrast between fundamental investing and chasing trends. Call us old “fogeys”, but it is our belief that fundamentals win out over the long haul. When the rookie tailgater is running on fumes and cold chicken tenders, the grizzled veteran will be refreshing with a Bloody Mary from his Yeti Cooler and eating a warm rib.
Keeping with the metaphor, the fundamental investor struggles, however, to distance themselves from the trend chaser when money flows easily. Negative and zero interest rate policies artificially pump up the speculative investor fare and allow rookies to party longer than their normal cycle. A recent book called “Winning at Active Management” touches on this concept of how speculative fare perform best in easy monetary environments, which artificially inflate index returns. On that note, another report pointed out that correlation, since 1928 between the annual change in the ten year treasury rate and the S&P 500i’s total return is 0.02%. In layman’s terms, this means that interest rates rise and fall without any predictive value. Thus, interest rates and easy monetary policy take up way too much of the investment discussion in our opinion. Fundamental investing is what matters most, not what some Federal Reserve Committee member said or didn’t say.
To that end we continue to look for value in the marketplace and not chase trends. Our investments in the energy sector via exchange trade funds have impacted returns in a very positive manner this year. In addition, over the past twelve to fifteen months, bond funds like JP Morgan Strategic Income Opportunities have juiced their returns this year to the tune of 7.92% with a current yield of 4.28% and a duration of 1.77 years by selectively dipping into the energy sector. As we have alluded to before, adding biotech and financial exposure via an ETF is something we have started to execute this year. Financials seem to have negative sentiment attached to them because of the misdeeds of a few and the specter of flat interest rates. On a recent conference call, one of our managers indicated their baseline scenario on financial holdings was +28% over the next three years and their bull case scenario was 100% (hypothetical, of course). Conversely, we have been held back by a few of our pure international plays, but emerging markets exposure and the First Eagle Global fund have more than neutralized the other international holdings.
We, of course, realize this letter has probably gone into more detail about tailgating than many expected. However, we felt the analogy of tailgating veterans versus a “Noob” might strike a chord. If it doesn’t, because you have not experienced the splendor of a crisp autumn football game with friends, then please allow us to suggest the following venues (in no particular order): The Grove in Oxford, Mississippi, War Memorial in Little Rock, Arkansas, South Bend, Indiana, Athens, Georgia, and Auburn, Alabama to name a few of our favorites. Not to exclude professional football teams, there are some great tailgating experiences in Pittsburgh, PA and Green Bay, WI as well. Regardless, any time good friends gather together with a mutual goal of gratitude and celebration, we are fans. On that note, we will continue to celebrate and express gratitude to you, our clients and friends. Please call with any questions or names of tailgating spots that we unfortunately left off due to length constraints.
General Compliance Disclosures
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. (“SSI”), Synovus Trust Company, N.A. (“STC”), GLOBALT, a separately identifiable division of STC and Creative Financial Group, a division of SSI. Trust services for Synovus are provided by Synovus Trust Company, N.A. 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 and Synovus Trust. Synovus Trust Company, N.A. is a subsidiary of Synovus Bank.
Pursuant to rules adopted by the U.S. Securities and Exchange Commission governing federally registered investment advisors, we request that you take time to compare your account balances and statements issued by National Financial Services, who acts as the custodian for your account(s). We request you contact us immediately if you do not receive these statements or if the values reflected 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
iThe 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). 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