Q3 2020 Creative Newsletter

4th Quarter 2021 AM Newsletter

October 18, 2021   ·   By   ·   Comments Off on 4th Quarter 2021 AM Newsletter   ·   Posted in Q3 2020 Creative Newsletter

New Years!

                The New Year’s Day meal seems to be an interesting time when customs and superstitions converge. At almost every house in the South there is a lively negotiation that ensues between spouses, one who tries to browbeat the other into eating collard greens as it will purportedly bring wealth, and the other tries to argue that their helping of black-eyed peas will produce luck, which will in turn create wealth. Many of us have been perfecting this argument since we were toddlers and we are not above acting like one if necessary. Of course, we all have traditions that make occasions special, and we would love to hear some of yours, but the reason we highlight the New Year’s Day meal is that somewhere in the strange superstition of black-eyed peas bringing luck is something pragmatic but hopeful; and the struggle between the two is meaningful. Similarly, somewhere amidst the speculative frenzy of a computer-generated currency, Bitcoin, going up over 50% last year, there is something practical, like a currency that has a finite supply that can’t be inflated by government. Our not too subtle parallel is that investing, like New Year’s Day dinner, is almost always full of a smattering of hope, a dollop of provision, and a dash of spice. Truly, to invest in something requires critical analysis amidst optimism sort of like the dynamic of traditions and superstitions. Here’s hoping this year doesn’t disappoint, and we all have enough collard greens and black-eyed peas to fortify us against whatever 2022 brings. At worst, we all had an inexpensive meal to start off the year.

                On that note, the start of the year always brings about the dizzying desire to prognosticate. It’s enough to make one feel as if they have had two helpings of collard greens and no cornbread. Of course, we always say it is folly to forecast, especially about the future, but we do take note of things. For instance, the Federal Reserve has committed to tightening monetary policy, margin debt is near all-time highs, market valuations are not cheap on a historical basis, and the market just had two years of fabulous returns in a bull market that started many years ago. From a mean reversion standpoint, one certainly understands the hesitation to plow money into the stock market. Of course, with a bond market offering negative real rates of return one can’t get much more excited there. Areas that appear cheap from a relative standpoint are similar to collard greens on the stove in that they have a little “stench” to them. However, according to some, you can be richly rewarded for wading into stinky areas. Global equity, emerging markets, energy, China, healthcare and biotech are areas one might sniff around if one had the intestinal fortitude. Of course, we could have another year where big tech and growth stocks could come out smelling rosy and while it certainly doesn’t pay to wager against them, we do think prudence is warranted and diversification has value this far into a bull market.          

                Stinky metaphors aside, one wonders what is actionable in today’s market. We have continued to add to healthcare over the past six months as anything not related to Covid has done poorly and there is definitely pent-up demand for healthcare procedures that have been put on hold.  In addition, we have tactically added to our positions in commodities and global securities. Finally, we have been reducing positions in areas of the market that have performed extremely well. However, we were able to make smaller moves in these areas and minimize taxes as many of our managers were already trimming winners. A good example of this would be a small cap value fund we use, that was up 45.29% last year. Yes, the performance is a good story, but their internal activity may be even more important. For instance, they purchased a company, Upstart, that ran up 676% from late 2020 to September of 2021. Per their discipline they reduced the size of the position in their portfolio (at one point it was as high as 10% of the portfolio due to the run-up). To their credit, they achieved great returns with this name but possibly more importantly they reduced it in September before it fell 51% through the end of the year. They mentioned still liking the name but a 676% gain in less than twelve months probably warrants reduction, in our opinion, and we welcome tactical moves like this within our client holdings. One might say we enjoy a little activity, variety, and spice in our life.                  

                Hopefully, all of the New Year’s Day meal talk interspersed with investment jargon has not made you hungry and has instead inspired you to share some of your family customs with us, whether it is New Year’s Day or other holidays. We also accept recipes. In particular, if anyone has any recipes that will improve the taste of collard greens we will move those to the front of the line. Also, please know  your portfolio managers and advisors made sure we ate our fair share of black- eyed peas and choked down a few collard greens as we can’t always count on others to increase their share of collards to make up for us. We realize we are in this together.

                Also, we didn’t really mention pork, ham, or cornbread in this discussion as it doesn’t elicit as many humorous debates between spouses. Depending on where you grew up the ham/pork symbolizes moving forward with good health as pigs root for food moving forward. On that note, we wish you all good health in 2022. Hopefully, we all ate enough pork/ham to keep Covid at bay.

P.S – For those who love a spirited debate we will let them delve into the sweet versus unsweet cornbread debate. Some things we leave unresolved as ours is not to question why.   

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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