Market Notes

Eagle, Colorado

Happy New Year!

I thought I was going to be able to open this post with a line about “what a difference a year makes”, instead, I think it should be “what a difference a couple of weeks makes…”

Holy smokes! – to use a technical term.

In 2018, the markets experienced the worst December since the Great Depression, the first losing year since the Financial Crisis and the worst Christmas Eve on record. Ouch.

Meanwhile as of 12/31, having followed our rules and sold along the way, we were sitting on 46.48% cash across the accounts we manage. (Each investor’s cash balance was different from this percentage – but the point is we have a lot of cash across the board).

Why is this important? In speaking with a good friend the other day whose money we do not manage (a family friend takes care of it), we got to talking about markets. He was asking my thoughts as is customary and being the competitive and curious person that I am I had to ask what his advisor was saying.

“He says it’s a buying opportunity.”

Says my friend….

To which I respond:

“With what cash? Did he also correctly identify a selling opportunity a few months ago?”

Of course, the answer was “no”.

The advisor in question only sees buying opportunities - never selling opportunities. And therefore, the only way his clients can take advantage of buying opportunities is to bring more cash to the table and make a contribution to the account. I ask you – who is that best for?

I make no claims about being able to predict the future - except that I can’t do it. Prediction is not what we do at Elevate - it is not what leads to success in investing.

I’ve said it before and I will say it many more times – success in investing comes from adherence to sound rules that have been rigorously tested and proven to work by many people - not just one lucky person. While it is always nice to get a good “stock tip” (that works out) - it’s not a real strategy.

I (and Jacob) spend my days managing portfolios and researching fundamental and technical measures of security valuation, while my friend’s advisor runs around all day telling people only about buying opportunities and never taking the time to even look for selling opportunities.

I understand the model – remember, these advisors used to be my clients when I was an institutional sales rep for Nationwide.

And why not look for selling opportunities in the market?

Because that would mean time spent not gathering more assets – which is the entire purpose of the majority of Broker-Dealer affiliated advisors (but certainly not all – as we were once trying our best to manage portfolios responsibly inside of the Broker-Dealer system).

Ask any of these folks how they intend to increase their own income streams over time and zero of them will tell you about managing money well – they will tell you about “growing their assets under management” aka selling more pie charts.

The main point of this post is not to pick on anyone – but rather to say that we do see buying opportunities in the market today. We recently took an initial position in our first new company in a while (Axis Capital: AXS), and since we followed our stops along the way we have plenty of cash with which to take advantage of this opportunity - and all the others that are sure to arise - no contributions from clients necessary!

Shane Fleury

Chief Investment Officer

Elevate

Legal Information and Disclosures

This commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Elevate Capital Advisors, LLC (“Elevate”) has no duty or obligation to update the information contained herein. This information is being made available for educational purposes only. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Elevate believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Elevate. Further, wherever there exists the potential for profit there is also the risk of loss.