Asset Management Letter Archive

Q3 2020 Creative Newsletter

October 14, 2020   ·   By   ·   Comments Off on Q3 2020 Creative Newsletter   ·   Posted in Asset Management Letter Archive

Dad Jokes
One of our portfolio managers was talking to his daughter recently when she remarked about how much anxiety she had given everything going on in the world. Being a master of homespun wisdom and humor, he quipped “I deal with my anxiety by not worrying about it.” Like most dad jokes, this fell flat until his wife responded with “Maybe because you lost your dad at 19 years old, had to work your way through college, and then came out on the other side in a pretty good position, you have a perspective that things will work out?” He quickly admitted she had made a very good point in hopes the vestige of his bad joke had dissipated into his wife’s searing epiphany. We share this vignette to drive home how important perspective is when it comes to dealing with the news of the day. The 24-hour news cycle seems to constantly shade the events of the day with a negative hue. Certainly, with items like Covid-19, wildfires, unemployment, and violent protests continuing we definitely understand anxiety and worry. However, as history buffs we realize there is always something to fear as one tries to move in a positive direction.
On that note, please forgive our bias, but we are strong believers in the power of humankind to improve its collective destiny. Sure, societies will make mistakes, but as we work together over the long term we can achieve a lot. For instance, 100 years ago the death rate in children under 5 was 32% and now it is under 4%. Air quality in major cities has improved by 30% since 1977. Some may say this isn’t enough, and we get that, but others may argue modern society also suffers from “prevalence induced concept change” which boils down to “The more progress we observe, the greater the remaining injustices appear.” We certainly understand these individual points of view, but there is a collective trend we must also weigh. Improvements like life expectancy increasing by 30 years since the 1900’s or the fatality rate at work dropping by 30% are significant in our opinion. In other words, life is still pretty decent even against a backdrop of Covid-19 and through adversity we oftentimes come out with vast improvements.
To the end, we have noticed some very significant and positive trends recently in healthcare and technology. For instance, teleworking and telemedicine has accelerated to the point we think there is no turning back. Further, the push to use digital technology for monitoring, diagnosis, and alerts has increased and should continue with additional support via artificial intelligence and personal care management. All of this should also increase proactive well-care and ease of access to healthcare versus the model of reactive sick-care with less access. Of course, gene and cell therapy and Crispr technology had already started the movement towards precision medicine years earlier, speaking of proactive well-care. Finally, the easing of regulations and the sharing of technology between private and public entities seems to be creating a new normal within the medical industry. All of this cooperation and change may create stress in the short run, but over the long haul we are encouraged by the progress.
All of the positive trends aside, we realize words on a piece of paper do not remove worry and fears about current events. Know that we are here to chat about anything on your mind whether it is a fear or a hope. Given where the stock market was earlier this year, we are encouraged with returns. They could always be better, but given the level of risk we encountered in March we haven’t felt the need to ratchet risk higher. It is also part of the reason you have seen us take gains, raise cash, and introduce gold to portfolios. The areas of the market that are cheap carry secular risks such as energy and finance, typical “value” areas of the market, so not many want to add that “value” risk to their portfolios. Of course, as Warren Buffett always said “You can’t buy what is popular and do well”. We are here to help discern what is a positive long
term trend versus a passing fancy and to do well for you. Please call with any questions and to let
us know what we can do better to continue doing “well” by you.
P.S – We know that many have asked questions about the election and we get those every
four years. Oftentimes, every four years we encounter the most important election of all time and
while we encourage all to vote as it is vitally important to our country, it typically doesn’t impact
the markets as dramatically as one would think. We have shared stats in our “Wisdom
Wednesday” calls that show the differential in returns between a Democrat and a Republican are
historically minimal. To that end we found a new statistic the other day we felt was worth
sharing, from 1933 to 2019 the average annual return of the S&P 500 during Democratic
presidents was 10.2% and during Republican presidents was 6.9%. Nearly all of the Democratic
average outperformance advantage can be explained by the boom years under Clinton and the
subsequent dotcom bust and Global financial crisis under Bush. If you exclude those two
presidencies the difference in returns is practically zero. We share this to try and help keep
perspective on this year’s election.
P.S.S – Hopefully, we don’t have to explain the concept of “Dad Jokes” (hint, it rhymes
with bad). However, if you need us to explain, we have several experts on site that can help.

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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