E Pluribus Unum
E Pluribus Unum, or “Out of many, one” has such strong meaning to residents of the United States that it is printed on our coins (among other things). Being students of history, we find it a little interesting that coins with our national motto (until 1956) on them are being rationed and pennies are scheduled to be phased out of production by 2022. Meanwhile, Bitcoin is hitting new highs and the Federal Reserve has begun working on a digital dollar. At the same time, modern monetary proponents keep grabbing more and more headlines as if they are the smartest guys in the room. For instance, there is a popular book called “The Deficit Myth” that argues, since the dollar is the reserve currency, deficit spending is a self-propagated myth created and maintained by politicians. If we just spent more money on all of our problem’s, things will likely turn out fine. Why are we going down this road? Certainly not because we want to talk about political issues any more this year. We mention this because we fear the ramifications of losing our heritage and credibility on the global stage. We bring this up because political instability and greater government spending lead to something we hope to have a handle on in retirement, inflation. (Political instability may also lead to devaluation of our currency but for now, we are going to put that under the heading of inflation as both destroy the wealth of their citizenry.)
Of course, what are some of the tools under our care that we can use to fight the threat of inflation? Stocks, commodities, and to a lesser degree, short duration fixed income. As an aside, fixed income is a better diversifier against stock volatility, but it is far safer after inflation risk is reflected in its price and not before. Thus, we continue to recommend an appropriate weighting in equities, fixed income and gold. Many have entertained adding cash to portfolios this year and while we certainly have it in accounts as dry powder for buying opportunities, we do not recommend a cash overweighting. Especially if there is a concerted effort by our Federal Reserve to “allow inflation to run hotter than normal”. On that note, forgive us for being the guy in the car asking if we should be worried about the temperature gauge blinking on the dash and the smoke coming from the engine. It truly feels as if we are so desensitized to the threat of rising prices now that we are inviting it at all costs.
Not to be incendiary in any way, but what could also add fuel to the flame and burn out of control? An incoming government with a penchant for spending? A pent-up populace cooped up and ready for travel once a vaccine works? Maybe aggressive centrists calling out polarization on both sides and leading a great political moderation? All of these are big ifs (some positive and some negative) that could lead to greater inflation from current levels. Thus, we must stay vigilant and flexible in our investing. To that end, how else can we prepare for rising prices? Do we get inflation protection from equities that are up significantly over the past ten years or do we get that from equities that were pummeled due to pandemic concerns? We would argue that we certainly need representation in these beaten up areas. Many, of which, remind one of the setup for value stocks circa 2000 to 2008. Do we know that sectors like small cap, international, value and emerging markets will outperform? To say so would be arrogant, but to humbly admit that throughout history assets revert to their mean seems a very prudent tactic to protect your wealth, in our opinion. Additionally, we think you can get “One, out of many” to play on our earlier quote by having diversification across many asset classes such as gold and short duration multi-sector income funds. Just like our country has produced many great returns from the melting pot of many, stellar returns do not solely reside in the headline mega cap stocks. They also live in visions of entrepreneurs forging into new areas of growth. Sometimes they even come together in a program like “Operation Warp Speed” and create a vaccine in less than 12 months that normally takes 10 to 15 years. Truly, the teams of people and companies working together today are what give us confidence we can surmount whatever comes our way.
Yes, we know it sounds kind of hokey to talk about what we can accomplish with a unified approach against a backdrop of cynicism present in most modern day societies, along with an admittedly challenging year. However, in our opinion, the greatness of the United States, and for that matter, the human spirit, is when we work together. One of our recently deceased hometown heroes, Phil Niekro, comes to mind when we think of the type of “greatness” needed right now. As Phil said in his Hall of Fame speech “I have never met a player or an owner who can honestly stand up and say ‘I own this game. It belongs to me.’ This is America. America is baseball. This game is home and it belongs to you, the fan. Cherish it and take care of it.” As long as we cherish our gifts and work together, we can defeat most anything that comes our way.
P.S. – For those of you that don’t know Phil Niekro, we recommend spending some free time learning about him. The quote “Heroes get remembered. Legends never die” comes to mind. He may have been a better person than he was a baseball player and that is saying a lot. Also, his signature pitch, the knuckleball, may be the most appropriate metaphor we can imagine for 2020. If you have ever had a knuckleball make you look silly at home plate, then you know what we mean.
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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
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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