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Q2 2018 Asset Management Letter

August 31, 2018   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

Working Capital

We recently listened to a TED talk called “The Meaning of Work” and we couldn’t help but think about our recently retired colleague Janet Medlock and the parallels to our team at Creative Financial Group. In particular, Margaret Heffernan speaks to truly robust and dynamic firms building social capital, a fancy word for trust, over time. In contrast, a hyper-focus on performance leads to a lack of candor and support, whereas the compounding effect of a team with strong social capital gets better over time. We like to think our team at Creative has been like this for years and with our recent additions, Helen and Torey, we feel our crew will only get stronger. Of course, we are fully aware that Janet brought a lot to the table. However, given as many as Janet helped with their retirement, it was time for her to practice what she preached and we are happy for her. Rest assured though, our team remains focused on what Aristotle called the telos of what we do at Creative. Telos is defined as “our inherent purpose” and many from Aristotle to Frankl have pointed to it as something that pushes us all to higher and higher levels of performance. We would point to the concept of telos and the environment full of social capital as to why we constantly question and persevere.

For example, in a candid group like we have at Creative, one can question the sage wisdom of elite institutions since we consider our clients’ concerns paramount to any fear of ridicule from the ivory tower. For instance, private equity, like real estate in the 2000’s and technology in the late 90’s, is one of the hottest investments around currently. The industry touts 1990 to 2010 annualized returns of 14.4% and the diversification benefits of private equity, but leaves out the valuation argument while some of its proponents refer to it as “a superior form of capitalism”. Please remember there is always logic behind each asset bubble, a set of ideas that form the foundation of consensus thinking and it should be questioned. Regarding private equity valuation, returns quoted from 1990 were based on investments made at four to six times earnings with debt of three to four times whereas new offerings trade at a more elevated 11 to 13 times earnings along with dangerously more debt of six to seven times earnings. Simply put, you are paying a great deal more for an illiquid asset while incurring more debt. Debt used judiciously is okay, but more of it always introduces more risk. Interestingly though the pundits point to the reduced volatility as reason to own private equity.

Let’s take the reduced volatility argument a little further. How can an asset class that is increasing debt loads from the companies it buys at elevated levels, tout reduced volatility? Herein lies the clue to the “superior” claim of private equity. In the private equity market, accounting firms often employed by the same private equity firm determine the prices of the firms they own. Consider that from December 2012 to September 2015 energy prices crashed by over 50% but private equity energy funds from the 2011 vintage were marked up 1.1 times higher during that same time frame. In a recorded phone conversation, the CIO of the Public Employee Retirement System of Idaho, refers to this “smoothing” effect as the “phony happiness” of private equity. In fact, a study by a George Washington University professor showed that if private equity firms adopted fair value accounting standards then the reported volatility of private equity would double. In conclusion, the perceived safety of private equity feels shaky at best to us and at worst, deceptive. Given our “telos”, we will continue to shy away from investments that sound too good to be true.

Finally, we come around to the diversification argument used by private equity firms although this is somewhat tied back to the internal reporting issue we noted earlier. David Swensen at Yale adds a prestigious voice arguing the point about the long term and diversified nature of private equity where money is illiquid, for five to ten years versus the public market. Of course, we wholeheartedly agree with this sentiment. If you are forced to hold your investments between five and ten years, while you receive questionable but comforting pricing reports, then we believe your returns will be much improved, compared to the public market. Variable Annuities fall into this same bucket, in our opinion, if you can’t get to your investments easily, oftentimes the performance is better.

We realize we went down a rabbit-hole on private equity this quarter, but it was our intention to highlight how our team continues to compound and work our social capital. We also continue to question the massive inflow into passive vehicles like ETF’s and index funds 9 years into a bull market while, as we stated last quarter, we are still able to find funds that beat their relative index on a risk/return basis since inception. To that end, in a Barron’s interview with Jack Bogle, considered the father of index investing, we noted that from 2005 to 2017 the average investor earned 5.5% in ETF’s and 7.2% in active funds. Meanwhile Berkshire Hathaway, Warren Buffet’s prestigious firm (Symbol BRK.B), is down 5.36% while the S&P 500 is up 2.65% as of 6/30/18. We say this facetiously but you could argue that one of the smartest guys in the world could use some private equity auditors before all of his money flows into an index.

Circling back to the theme of work, we close with the thought that robust companies succeed because conflict and candor is safe within their organization; because scratchy and impatient people are determined to think for themselves. We encourage that behavior on our team so we respect it with our clients and friends. Please, candidly, call us with any questions and concerns as we are here to think through this journey with you.

 

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.

Q1 2018 Asset Management Letter

August 31, 2018   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

Ubuntu

Boyd Varty, a wildlife tracker and author from South Africa, recently wrote a book, “Cathedral of the Wild”, where he regaled the reader with the “Art of Tracking”. To paraphrase him, tracking an animal requires a relentless attentiveness to everything around you, stepping into the unknown to pick up clues, and a discipline within the uncertainty. The parallel to what portfolio managers do in their day-to-day pursuit of value in the marketplace is quite appropriate, in our view.

We bring the metaphor of tracking up for a reason. In contrast to 2017, it is natural for the market to go down, and when it does, value presents itself. When the Federal Reserve holds interest rates down the environment doesn’t react normally and a false sense of security can ensue. In an artificial setting, a passive index with the lowest costs based on market capitalization would probably be the investment du jour. However, in a natural setting, one could encounter risk and uncertainty that causes irreparable harm. The generic investment in a basket of stocks and the safe harbor of a well-trodden path have similarities. Uncertainty promotes discipline, whereas security can breed complacency. It’s our job, in an unnatural environment, to remind our clients about the need for discipline and try to prepare them for potential dangers lurking ahead.

Given the media’s tendency to publish a story and follow the ratings, we feel there is a logical basis for groupthink inherent to journalism. To that end, we understand the financial media’s attention to the passive versus active debate and the popular conclusion that the S&P 500 Index outperforms the average active manager over the long term. However, data shows that managers with low fees, low turnover, proper incentives, an experienced team, and a differentiated portfolio have historically been more likely to outperform both the index and the average active manager. For instance, funds with low fees and high investment in their own funds have outperformed in 89% of all rolling ten-year periods. Of course, this same herd mentality couldn’t be wrong three times in the past twenty years. There was great safety in the all-growth, all technology horde in 1999, right? And, of course, that same group didn’t misguide anyone in 2006/07 with the collective fact that real estate had never ever declined nationwide. These examples of the downside of herding are not meant to cause mental discomfort. They are meant to foster reflection and stillness. It is in this attentive state when trackers are most attuned to their environment and most aware. The noise of the market can remove one from this stillness and is what leads to the investing style of “passive, passive, passive”, in our opinion. We think a relentless pursuit, like investing, requires a well-planned strategy and active tracking of the market’s animal spirits.

On a topical note, our active fixed income managers outperformed their benchmark in the first quarter but more importantly continue to outperform the aggregate bond index over the five and ten year time frame on a risk adjusted basis. The core of our active portfolio managers outperform on a risk and return basis over the past ten years or since inception. Some may slip over the shorter time frame, but over the long term and a full market cycle, they tend to outperform. Finally, and most relevant to this point in time is that active and passive management outperformance moves in cycles like all natural patterns. Historically, active outperforms in negative and low return environments and with the S&P 500 more than doubling in the last seven years, and also not correcting by more than 20%, the setting seems better suited for active management, in our mind.

Please keep in mind, though, we have and will always make use of index funds in asset classes we feel are cheap, so we are not dogmatic regarding the active versus passive debate. Like a good tracker, we are relentlessly remaining fluid and attentive to the signals the market sends us. This “connected” state logically leads to the African value called “Ubuntu”, which means “I am because we are”. To paraphrase Boyd Varty, we experience the deepest parts of life because of our relationship with others. To that end, our relationship with you mirrors the values of Ubuntu and is deeply significant to us. Please contact us with any questions or stories of your relentless pursuits.

 

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.

Q4 2017 Asset Management Letter

January 22, 2018   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

New Day and New Year

One of our portfolio managers was watching the Golden Globe awards with his daughter recently when Oprah Winfrey made her rousing “New Day” acceptance speech. From a father/daughter perspective, the determined tone of her words was very uplifting to say the least. Similarly, the market’s performance last year was also highly encouraging. Who would have expected the S&P 500i to be up 21.38% last year, given the headlines we experienced? Keeping with the “Golden” theme, the Hollywood Foreign Press honored Oprah and the foreign markets bestowed investors with even better performance than the S&P 500i (Emerging Markets were up 37% and International ex-Japan was up 25.03%). Couple this information with the small business index near a 35 year high and there is a definite luster to the market right now.

We highlight these observations because with great hope can also come great disappointment. The optimist in us wants tax cuts to spur the market even higher, but the skeptic in us wonders about the market last year where the S&P 500i was up every single month, a feat never before accomplished. A market where liquidity will be reduced as the balance sheet of the Federal Reserve shrinks from 4 trillion to 2.5 trillion over the coming years and the fed funds rate may increase by ¾ of a percent. Not to mention, one of the most reliable recession indicators is an inverted yield curve and if the fed funds rate continues higher without the long bond rate going up, then we are dangerously close to an inverted yield curve. In addition, the new chairman of the Federal Reserve, Jerome Powell, will have to navigate all these uncertainties with no guidebook, as there isn’t one for the grand experiment called quantitative easing.

In our opinion, a timely example of lofty expectations leading to poor results is cryptocurrency, such as Bitcoin. We have seen this before with the popular sentiment in 1999 of “all growth stocks, all the time” and in 2006/07 with the “real estate never goes down and they aren’t making any more”. Currently, there are over 1,400 cryptocurrencies and many were up triple digits in 2017. Yet this asset class operates in a decentralized environment with no discernible cash flow. We realize there is value in decentralized public ledgers, censorship resistance, and being off the grid, but there needs to be an identifiable expectation of future cash flows at a reasonable rate of return in order for it to be considered an investment or it is debatable whether one should part with their savings. However, with none of that in sight, cryptocurrencies had more money flow into them in 2017 than mutual funds and ETF’s. To be clear, we do not mean to impugn cryptocurrencies as there is merit to much of its design. It is our intention to refine the difference between investing and trading for our clients. There is a self-fulfilling cycle to investing and optimism that we do not see in the speculative world of trading.

It is with our fundamental foundation we continue to invest. When growth stocks have outperformed value stocks the past eight years, we lean into value stocks since they have outperformed growth since 1927. When domestic stocks have outperformed international over the past eight years and earnings have increased significantly for international stocks, we shift more into international. When sectors like pipelines that do not have a strong correlation with oil follow oil down but not up, we look there for possible gains. These are the types of moves we are making because the fundamentals look promising, not because they are the investments du jour.

We realize we spent a great deal of this letter dancing around the dangers of unbridled optimism, but we think that is part of our role as a risk manager for you. Please do not label us as cynics. To paraphrase Helen Keller, we feel nothing can be done without hope and confidence. However, we are also aware that hope oftentimes makes an asset class a poor investment as returns are a function of the price paid, not sentiment. When sentiment is high, there is a greater chance of mean reversion than sentiment continuing to march higher. Our job is to make sure your realistic expectations are met, so you can foster a “New Day on the Horizon” full of hope for others. Please call with any questions.

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.

Richard Raby – How Financial Planners are using Technology

October 23, 2017   ·   By   ·   No Comments   ·   Posted in News

Over at Metro Atlanta CEO Richard Raby discusses the roll that Technology is playing in Financial Planning.

Q3 2017 Asset Management Letter

October 16, 2017   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

Stormy Weather

Perhaps William Faulkner described hurricanes best when he said it was like “looking down upon a world turned to furious motion and incredible retrograde”. This hurricane season has been remarkable for its level of devastation and tragedy. However, at the same time the response of everyday people put in extraordinary situations has been nothing short of heroic. Consider NFL player, J.J. Watt, setting out to raise $200,000 for hurricane Harvey victims and raising over 30 million dollars at last count. Think of the linemen from all across the country who worked tirelessly to restore power from both hurricane Irma and Harvey. Finally, the first responders in Puerto Rico, some from as far away as New York, who were still providing support weeks later after hurricane Maria hit. Truly, if you have ever met personnel headed towards a natural disaster, then you know how encouraging the human capacity to help their fellow man, woman and child can be.
We bring this setting to the foreground of this month’s quarterly letter for two reasons. One is to pause over what matters most, expressing sympathy for all that have been caught in harm’s way. Two is to draw a parallel to investing. We realize there is a little leap of faith on this subject, but bear with us on this one. We consider “value” investing to be similar to picking up the pieces and getting back to work with what you know. When others are lost in a depressed state, the “value” investor is rebuilding their construct brick-by-brick because they know their intrinsic value deep down inside.
Having this “value” perspective has typically led to outperformance over the long haul (at least dating back to 1977 vis-à-vis the Russell 3000 Value and Growth indices), but there have been shorter time frames when “growth” investing has done better. We lean towards the value tilt given its historical outperformance, but we do invest in growth names as well. For instance, our growth managers are up between 14 to 27% thru 09/30/2017. However, the purchases of items like biotech and healthcare that were beaten down at the end of 2016 and are now up 25.95% and 20.79%, respectively, are the type of “value” moves you will continue to see us make. Financials are a similar area you have seen us add to over the past 18 to 24 months that rewarded significantly in 2016, but slowed down a bit this year as the sector is only up 13.44% YTD. However, we are still very comfortable with the upside potential of our financial sector holdings. Finally, our international positions have also rewarded significantly as our names are up between 20 and 32% for the year.
Of course, with a market up 14.24% this year, it is becoming hard to find cheap sectors. There are specific stocks within sectors that look cheap, but picking those names require significant skill and is usually best done with an active manager. We, of course, use several of those managers and think they are poised to outperform in a market rally that is nearly eight years old and facing the threat of rising interest rates. We will continue to use passive strategies in markets that appear cheap, but with many of these opportunities disappearing you will see us recommending more active strategies until the market corrects significantly. This goes for fixed income, as well as equities.
We hope this quarterly inspires you to remain steadfast against any and all “furious motion” outside your door, both figurative and literal, and, of course, reminds you of your intrinsic value. The weather of the past several weeks and the violence in Las Vegas have heightened our need to encourage others. Investing oftentimes requires optimism in the face of adversity so we certainly understand the need for support. Of course, investing is not just in stocks and bonds. It is also in people. Therefore, we find great solace in the heroes from the hurricanes or something as simple as the blood donors from Las Vegas that stood in line for three or more hours. The parallel to “value” investing is not wasted on us and we hope it resonates with you as well. Please know we value you and your relationship greatly.
______________________________________________________________

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.

We’re Moving! – Effective August 28th

July 17, 2017   ·   By   ·   No Comments   ·   Posted in Newsletters

CFG NEWS!

We're Moving

We are excited to announce effective August 28th we are moving.

Our new address will be:

 3400 Overton Park Drive, Suite 600, Atlanta, GA  30339, near the new Braves stadium, SunTrust Park.
Hopefully, we can provide a convenient excuse to come see an Atlanta Braves game at the Battery.

Look for our new building with the Synovus logo.

synovus

creative map
From Georgia 400 traveling South

Take Georgia 400 to I-285 West to Cumberland Blvd SE in Cobb County. Take the I-75 South exit from I-285. Take exit 258 from I-75. Continue on Cumberland Blvd SE and turn left on Overton Park Drive.

Or you can take Georgia 400 to I-285 West to exit 22 toward Northside Drive and Powers Ferry. Turn left on Northside Drive. Turn right on Powers Ferry Road. Continue straight on Akers Mill Road. Turn left on Cumberland Blvd SE. Turn right on Akers Mill Road SE. Turn left onto Overton Park Drive.

From 75/85 Downtown

I-75 North to Cumberland Blvd SE in Cobb County. Take exit 258 from I-75. Continue on Cumberland Blvd SE and turn left on Overton Park Drive.

From Interstate 85

I- 85 to I-75 North. Take exit 258 from I-75. Continue on Cumberland Blvd SE Drive and turn left on Overton Park Drive.

Or you can take I-85 to I-285 West to Cumberland Blvd SE in Cobb County. Take the I-75 South exit from I-285. Take exit 258 from I-75. Continue on Cumberland Blvd SE and turn left on Overton Park Drive.

Q2 2017 Asset Management Letter

July 14, 2017   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

Brevity – The Soul of Wit

 

In the 1600’s Blaise Pascal said “I have made this letter longer because I have not had the time to make it shorter.” Of course, with our wits about us and the knowledge that many are enjoying vacations and not holed up reading a quarterly missive, we are going to do our best to make this brief. The market is up nearly double digits per the S&P 500i, 13.81% internationally (MSCI EAFEi), 4.99% in small cap (Russell 2000i), 16.61% in healthcare (Morningstar US Healthcarei), 14.07% in technology (Nasdaq Compositei), and down 13.59% in energy (Morningstar US Energy Cappedi). Growth has outperformed value this year by double digits, so the value sector that outperformed last year, has not looked as hot recently. The good news here is that our value and growth names have both outperformed their respective indices. Additionally, our international, tech and healthcare names have also lifted returns. Alas, we are not perfect as our energy exposure has been hurt this year, but the good news is, we gained nearly 30% in energy last year before this year’s dip. The financials that we added last year are up nearly 35% over the past twelve months, but are only up 6.12% this year. We still find this sector attractive as many financials are near book value with much improved balance sheets.

Of course, the real reason for the brevity of our letter is that we need to take care of administrative tasks that are on the horizon. We are moving to Overton Park on August 18th. We are a little sad about leaving our old location, as many of us have enjoyed being in roughly the same area for 20 plus years. On a lighter note, hopefully we can provide a convenient excuse to come see an Atlanta Braves game at the Battery, after a review of your investment portfolio. Please keep our move in mind around August 18th, as we have been assured the move will be seamless, but none of us have ever moved and not experienced a few hiccups in the process. In other words, if you call in on August 21st, please be patient with your friendly Creative Financial Group associate.

Additionally, we are rolling out a new financial planning tool, eMoney, which will display your entire financial portfolio – including loans, liquidity, investments and much more, all in one private portal. There are many benefits to this non-transactional portal that has a 256-bit socket layer encryption. eMoney will allow you to:

  • Aggregate your financial accounts including loans, mortgages, insurance, credit cards, 401(k)’s and more.
  • View, organize, and oversee your finances with precision and confidence from a single screen.
  • Benefit from robust cash flow tracking, budgeting, and educational tools.
  • Store, protect, and organize important documents securely in a digital vault.

If you are interested in setting up this portal, please contact us and we will send you a link to get the process started. The link is time sensitive and must be activated within seven days or it will deactivate; hence the reason we have not sent a mass mailing out to clients.

Keeping with the short but sweet motif, let’s wrap this up. Teaming up with you over the past twenty years has been our pleasure. We will be in the shadow of “America’s Team” in Cobb County next quarter, but we think our squad can hold its own against anyone. We look forward to many more years ahead with you in our new location.

P.S. With all due respect to Shakespeare, we are a little partial to Ray Bradbury’s quote “Digression is the soul of wit” but that is a digression for another letter.

 

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.

FPA Crescent

April 13, 2017   ·   By   ·   No Comments   ·   Posted in News

FPA Crescent

Photographed:  Creative’s Richard Raby (left) and Bart Gadlage (Right), with Steve Romick (Center) – Portfolio Manager with FPA Crescent and guest speaker at our April 13th Lunch & Learn providing an excellent, engaging stock market overview.

Q1 2017 Asset Management Letter

April 13, 2017   ·   By   ·   No Comments   ·   Posted in Asset Management Letter, News, Newsletters

Just Hiking Thru

One of our esteemed colleagues, Scott Mauldin, recently committed to complete the Appalachian Trail. Our romantic, adventuresome self describes this six month journey as a destination while our pragmatic, “Uber” passenger self wonders how do you know when you are lost. All jokes aside, we applaud repairing to the woods to live deliberately and suck the marrow out of life to paraphrase Henry David Thoreau. We also agree with Thoreau’s mentor Emerson who said “Do not go where the path may lead, go instead where there is no path and leave a trail.” These simple, naturalistic concepts are central tenets to the art and science of investing, in our opinion.

For instance, hiking across several states with only a backpack, clothing and a map takes a deep understanding of the fundamentals of outdoor recreation. If you wander off the beaten path, you can find some breathtaking vistas but you can also never be heard from again. Not unlike a value manager who determines the value of a stock using fundamental training and establishes a position where others fear to tread. Oftentimes, one reaps generous rewards in this way, but make too many bad picks and investors will take a different journey. Of course, knowing when to abandon a seemingly wayward path is the hard part. Sometimes the next great surprise is just around the corner.

Another area emphasized by Hike-thru backpackers that parallels investing is the hiker’s gear. The weight of a hiker’s gear is similar to the expense ratios on funds or exchange-traded funds (ETF’s). Backpackers and by extension, returns, are held down by extraneous weights. Cutting extra weight, while still retaining the essentials is a matter of deep significance for someone in the woods for six months. In fact, one of the first stops on the Appalachian Trail, Mountain Crossings, has an almost cult-like following when it comes to their “shakedowns”, where they streamline backpacks and indentify problem areas for hikers before they get too deep into the trail. This approach is similar to the focus we have had for years with low expense mutual funds and exchange-traded funds. In fact, you could say that “shaking” down portfolios is something we do every day.

Finally, hiking alone in the woods is by definition a solitary pursuit requiring patience. Choosing to overweight financials like many of our managers did last year, or energy in 2015/16 and healthcare/biotech in late 2016 can be a lonely feeling while you wait for an upturn. Purchasing an asset with less perceived downside risk and higher upside potential while awaiting a momentum change is the mantra of many “value” investors. When Benjamin Graham (Warren Buffet’s mentor) was asked by the Chairman of the Senate Committee on Banking and Currency in 1955 to characterize when and how the momentum change occurs Graham responded “that is one of the mysteries of our business… We know from experience that eventually the market catches up with value. It realizes it one way or another.” Peter Cundiff, another famed value manager, took this thought process a step further by stating “The most important attribute for success in value investing is patience, patience, and more patience. The majority of investors do not possess this characteristic.”

Keeping with the trail metaphor, a nice walk in the woods can turn ugly soon if conditions change. A sudden storm or a wild animal can wreak havoc on someone unprepared. With the price-to-sales ratio of the market at its second highest level in history and price-to-book ratio nearly 2 times the 2009 level, we are leery of “bears” lurking in the dark. Add other examples such as Tesla trading at a market capitalization higher than Ford, even though it delivered only 80,000 cars last year compared to 6.7 million by Ford, and we feel even more compelled to hew to the path carved by older hands that have traveled this trail many times. Several of our fundamentally driven managers are holding significant levels of cash, and we feel very certain they are doing this for a reason. Our strategy is to provide shelter during storms thereby recovering quicker than others. In financial terms, we call this minimizing downside risk.

In closing, please know that we support all who endeavor to carve their own path or march to the beat of a different drum. The wealth we create and maintain is hopefully a tool to help support or manifest destiny for generations to come. On that note, for those who wish to follow our dear friend, Scott Mauldin, on the Appalachian Trail, you can find him at http://www.trailjournals.com/entry.cfm?trailname=21046.

 

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

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). 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.


Copyright © 2011 Creative Financial Group
All rights reserved.

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