Broker Check

April Newsletter 2024




      April 2, 2024


“Stories Told and To Be Told”

I watched the sunrise this morning in Arizona where Jeannie and I have spent a good deal of the winter avoiding much of the Colorado cold. With the returning songbirds singing their songs of love and excitement, I couldn’t help but reflect on the rebirth of the season bringing new hope for the future, despite the daily challenges which we all face.

My thoughts then wondered to the past, remembering the Spring of 1988 when Jeannie came into my life on a whim…  “Have you tried the new restaurant?” The food was great, and my life suddenly had a new purpose after an   amazing dinner and then a day of spring skiing together at Wolf Creek; to be followed by an amazing wedding day on a beach in Hawaii that following November. Now, thirty-six years later, my grandkids still enjoy the stories of how NeeNee and Grandpa forged a life together from common interests and from new adventures along the way. Kyla and Keagan are now seventh generation Durangotangs, creating their own stories of who they are and where they come from. Their stories will include stories passed down from their ancestors finding America, fighting the Revolutionary War, going West as pioneers in the 1800’s; and Grandpa’s decision to leave the hustle and bustle of Southern California for a more meaningful life in Durango.

As James and I meet with new clients, I tell my “story”, of being trained as a CPA at Price Waterhouse in Southern California; moving to Durango in the early ‘80s to escape the inevitable “big firm” burnout and focusing my CPA practice on the financial planning aspects of my clients’ lives and goals for their futures. With that broad base of experience, helping clients manage their tax liabilities by utilizing retirement plan options, it was a natural “next step” to become a Certified Financial Planner (CFP) and then to establish an investment management practice. What is now Intelligent Investment Management, LLP was built on the concept of Modern Portfolio Theory and broadly diversified portfolios. Our niche practice was built on the foundation of Closed End Funds (CEFs), focusing on their unique characteristics of being traded on the stock exchanges based on investor demand and performance; generally being purchased at less than their “net asset value” (NAV) and therefore not subject to the uncontrollable inflows and outflows driving “Open End Mutual Funds”. Over the course of my twenty-seven years of managing portfolios of CEFs, I’ve employed a strategy of buying at a discount and earning at full net asset value. This approach has often contributed to several percentage points of total return over returns from similarly invested open end funds. While the differences may seem small initially, they have accumulated significantly over time, resulting in substantial long-term gains.

Along the way, we have made all portfolio decisions as “active managers” shying away from index funds, complicated option trades, AI driven algorithms, crypto drama and momentum trades. Rather, our portfolio decisions are made from detailed “fundamental” analysis of financial data, focusing on proven revenues, income and dividend distributions. As the securities markets continue to reach for the stars, we are continually re-balancing portfolios to take gains and put them “in the bank”. In the process, we have successfully built client income portfolios with “bond ladders” providing a steady and reliable source of income for client distributions and complete return of invested principal upon their fixed maturity dates. This strategy is time-tested and essentially provides an annuity without the high underlying cost of buying an actual annuity.

Looking back to the humble beginnings of our story in 1997, our diversified strategies have produced out-sized and generally less risky total returns (growth and income) than those obtained by just “following the crowd”. As a first client, mine and Jeannie’s retirement portfolio (managed just like our clients; although no management fee is charged to us) currently allocated sixty-one percent to equity positions and thirty-nine percent to income positions has grown by a total of 487 percent over the twenty-seven-year period.

The underlying twenty-seven-year average annual return of eighteen percent is most likely not achievable under current market and economic conditions for a variety of reasons. However, looking back only ten years which includes the Pandemic and its inevitable inflationary scourge and the Fed’s fight to lower the inflation rate, our portfolio has grown by roughly sixty percent, with a more achievable long-term average annual rate of six percent for a 60/40 portfolio.  

Our management story includes successfully surviving the “Tech Wreck” of the late nineties; 9/11; the “Financial Crisis” of 2008; numerous global tensions and the current post-pandemic economic dilemmas. Throughout, we have maintained our active approach focused on helping our clients meet their long-term financial goals. To that end, we have been diligently rebalancing all accounts to keep all asset allocations in line with each client’s Investment Policy Statement. Your Portfolio Review is included with this letter. You can easily see the rebalancing by reviewing the Asset Allocation report and noticing the movements out of equities and into income positions.

Expanding on our story, please take notice of the various positions in allocations that generally do not make the nightly stock market news:

  • (HQH) Our healthcare bio tech equity fund which includes many of the companies that have been bringing to market new drugs which will improve our lives and our longevity (with first quarter gains of almost seven percent).
  • Several Infrastructure funds, Alternative Income allocations (UTF, UTG and GLU) which are positioned to benefit from the current “electric push” (UTF and GLU are up over thirteen percent in the first quarter of 2024).
  • Three agriculture funds (LAND, FPI and VCRRX) which are generating meaningful dividends despite the many challenges brought on by Mother Nature. With diminishing land available to farm and ever-growing populations to feed, the ag funds will continue to have a place in our diversified portfolio producing profits along the way.
  • Our venture capital fund, (PIIVX) is up over four percent for the first quarter, in part by the anticipation of Elon Musk’s SpaceX company going public.
  • Other “non-traditional” positions in our portfolio which are generally not found in the mass marketed ETFs and other funds that are managed by robots, algorithms and generally younger and less experienced advisors that have yet to be “battle tested”.

With our markets now generally considered “overbought” and ripe for a correction, having the broadly diversified strategy in place will once again prove beneficial. Ask James about the “LOST DECADE” when the S&P 500 was negative for ten years and our diversified portfolio held its own.

The twelve-month returns reported in your Portfolio Review reflect expectations of continued strong corporate earnings, enthusiasm around all things AI, a healthy US economy and willingness by the Fed to cut interest rates as inflation recedes. We think all these expectations are already baked in, and a pullback could be imminent. We have already seen several of the Magnificent Seven get trounced lately as evidenced by the likes of Apple and Tesla. As in the past, we will use such a pull-back as an opportunity to “buy low” all the quality portfolio positions that have traditionally taken our returns to higher valuations with meaningful dividends. A pull-back could also represent an opportunity to make a Roth conversion for long-term tax-free benefits.

Our story would not be complete without reminding you of our commitment to the Fiduciary Standard which James and I live by as CFPs.  When it comes to financial security, our number one priority is keeping our clients’ interests first and being knowledgeable and accountable as advisors.  That is why both James and I are CFP® professionals. As CERTIFIED FINANCIAL PLANNER™ professionals we agree to maintain a standard of excellence by meeting education, experience and ethical standards.  We have made a commitment to the CFP Board to serve the best interests of clients.  Many people think all financial planners are “certified,” but this isn’t true. Just about anyone can use the title “financial planner.”  Only those who have fulfilled the CFP Board’s requirements can call themselves a CFP® professional.

And lastly, I feel it necessary to tell you that one large investment management firm has just released its report on the cost of retirement, reflecting that the amount needed has surged over fifty percent over the last five-year period. Please call Laura and arrange for an appointment to review your situation and make any needed changes to your long-term plans.

If you know of anyone that would like to hear our stories, please give them our name. We would like to become a part of their positive investment story.

As always, call us anytime if you have questions.


Intelligent Investment Management, LLP