Good Advice Based on Sound Fundamentals

It makes sense during crisis. And it makes sense today.

Our advisors at Global View have provided sound advice for more than 20 years. To make sure our clients understand what we do, we write to communicate our thoughts. We don’t hesitate to do this even during periods of high uncertainty and crisis. It’s a lot harder to tell the hard truth, but we believe it’s necessary to be truly transparent to be honest. As COVID-19 slowly becomes a thing of the past, it’s a great time to talk about the future.

During the Great Financial Crisis, and the COVID-19 panic, we advised clients to focus on sound investment strategies based on strong fundamentals; that investing in great businesses, wherever they are and however big they are, is the recipe for investment success. There are no shortcuts; it takes patience, and sometimes you look stupid in the short-term to reap long-term gains. While the two crises were quite different (the Financial Crisis was predictable), our reactions during them are important.

In 2007, at Global View, we advised clients to avoid owning banks and financial services companies profiting from speculation on overpriced housing. We knew the housing models were based on unsound assumptions that would eventually burst. This helped reduce downslide in the Great Financial Crisis and led to excellent returns in the recovery.

During the years after the Great Financial Crisis, before numerous corrections and milder bear markets, we held the course, sticking to our knitting of investing in excellent companies with solid fundamentals. Not caught up in labels, we know the secret to investing is owning companies with the right combination of growth, value and quality. As a firm, we have grown into one of the top RIAs in the South. We have a team of planners, an accountant and an attorney on staff and under one roof – or more lately, one text/Zoom away. Several years of this period were our most difficult as advisors, as we saw index funds temporarily outshine our strategies. But we knew this would not last.

We developed an in-house stock strategy focused primarily on U.S. stocks and other international bellwethers. But for the best opportunities outside of the better-known company space, we rely on the fund managers who have proven their mettle during difficult times. We use outside expertise also in the enormous and highly diversified global fixed income world. Our approach to both hiring and firing investment managers of ETFs and mutual funds is explained here: How to Pick Investment Managers Responsibly (It’s About Your Retirement and Your Grandkids).

In this piece, written during the peak of the Great Financial Crisis, we addressed our lack of surprise. We knew the banks were taking too much risk and that to suppose housing prices would always rise by at least 3 percent per year was a fantasy. We even fired an investment manager for his hubris in justifying ownership of one bank that we knew, having read the bank’s 2007 letter to shareholders, that the bank was in trouble: Third Quarter Newsletter 2008.

Here’s another where we shared our contrarian view that prices had fallen too much, and that opportunity was greater than any time since 2002: Global View Market Outlook January 2009.

Our work drew the attention of journalists. We were published in Money Magazine in 2016: Ken Moore Quoted in September Money Magazine.

It’s not just investment advice. We provide full comprehensive financial planning. Years ago, we recognized the need to have accounting and estate planning expertise on staff. This cuts out miscommunications and helps us deliver timelier and more accurate advice. In dialogue with our clients and internal team of planners, we can solve our clients’ financial issues and give them choices. The greatest failures we suffered through the years were the handful of clients who didn’t take our advice and instead took more or less risk than appropriate at exactly the wrong time.

Which is why we began educating our clients on the risk in their portfolios and what they must expect in the short-term. It is very predictable that a range of positive and negative returns can occur in the short-term, say over six months. It is also predictable the range of returns that can occur over three-year periods. This varies wildly between fundamentally sound strategies as opposed to index-based strategies.

We’re in the process of putting together micro lessons on financial planning to post to this website. These will include:

Estate planning 101
Saving for Retirement and Education
When Can I Retire?
How Can I Protect a Disabled Child?
Others

More recently, Citywire, a publication focusing on news in the RIA-world, named Global View as a top advisor in the Carolinas. The publication especially likes the idea of my title, Confusopoly Translator. Confusopolies are companies and industries that are intentionally confusing in order to profit from clients. Financial services is a confusopoly because investors are even confused about the term “free.” Free trading doesn’t exist. There is a difference between the buy and the sell price of a security. This difference is a source of profit for firms taking the orders. This means they will pay brokerage firms for the flow of orders to them.

So, what does the future hold? Today, valuation disparities remain between smaller, stodgy companies and larger, growing ones. They are better overseas than in the U.S. Most experts agree the next two decades will experience higher inflation than the last two.

This means we must be seeking opportunity in the global small cap space.

Investors in traditional fixed income face zero or negative returns after inflation. This means we need to think outside the box; to own mortgages in the U.S. and even overseas when opportune; we need to own some bonds in foreign currencies; we need to continue to rely on higher returns from lending to solid, well-growing private companies, which the large banks continue to ignore.

In short, the opportunity set remains excellent. While we cannot predict what will happen in the short-term, we believe the next two decades will once again be profitable for investors focused on sound fundamentals.

Let’s make sure, as we make this journey, that we address your key financial planning concerns. And that we avoid the pitfalls other investors face by making decisions based on unsound fundamentals.