Asset Management Letter

AM 4th Qtr 2019 letter

February 5, 2020   ·   By   ·   Comments Off on AM 4th Qtr 2019 letter   ·   Posted in Asset Management Letter

Pound cake

Over the holidays, one of our portfolio managers was introduced to the fine art of making pound cake. After he googled what creaming the butter and sugar together meant, he realized that the process was more complicated than he realized. Similar to investing, when the end result is positive with a good pound cake or a solid market return, it all seems easy and feels great. However, once things get a little more complicated a refined skill set comes in handy. For instance, baking an off-the-shelf pound cake is similar to investing in index funds. You can stick with low cost ingredients and no active management but you will certainly not have complete control over the end result. Similarly, when the market corrects and you are invested in an index, then you are going down the same as the market. Thus, given this situation, many investors try to time getting in and out of the market. Of course, as famed investor Peter Lynch said many years ago, “More people have lost money anticipating corrections than in actual corrections.” Therefore, in our opinion, having a skill set and capability to delve into opportunities outside of the norm is very important ten years into a bull market when investing is less likely to be easy.               

               Of course, if we all remember correctly, on the way to double digit returns in equities last year we were constantly peppered with talk about inverted yield curve, oncoming recession, trade wars and even impeachment. As we mentioned last year, we didn’t think a recession was imminent and instead stayed invested with our active management and participated in a fantastic year. Timing the market is never easy, but if you had instead tried to time all the negative talk with off the shelf index funds, you would have had a tough time. Indeed, we realize it’s normal to try and forecast the next recession or downturn. In fact, in a world with a 24/7 news cycle that leads with negative news day after day we think pessimism is the default position. Never mind that extreme poverty has fallen below 10% of the world’s population for the first time in modern history as noted by Ben Carlson in “No One Wants to follow a Pessimist”. Keep in mind that it was as high as 60% in the early 1980’s. Also, consider that child mortality has fallen to record levels and famine is virtually extinct. Additionally, Carlson notes that we use 65% less land to produce a given quantity of food compared to fifty years ago. In other words, we are living through some of the greatest improvements in living standards in history, but you wouldn’t know it if you lived headline-to-headline and didn’t have historical perspective (a point we alluded to in the last quarterly letter “Keeping Perspective”).

We realize we are bashing prognosticators and pessimists a little bit in this letter but that is not our intention. We are instead trying to emphasize that good news takes place over decades and bad news can happen in instant so many stay caught in the moment and miss the positive long term trends. Investing, like baking, can take a while to prove its merits, but it sure can be worth the wait. So our recommendation for the next decade is to bake more with loved ones and leave the active management to us. We think that the magic of compounding and self-rising flour will consistently return smiles to your face.  

P.S. – Given our recently renewed interest in pound cakes, if you want to share any recipes, please consider this quarterly letter an open invitation to reach out to us. Obviously, we could also talk about investments and financial planning if you would like to do that as well.

P.S.S – We are having a client lunch on February 12th where CEO Ross Glotzbach of Southeastern Asset Management the adviser for Longleaf Partners Fund will speak. Southeastern has been a leader in value equity investing for over four decades and we think you will find what they have to say very interesting. Please call the office and RSVP for the event as seating will be limited.




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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