Broker Check

October Newsletter 2023

October 1, 2023




Ever since I started the investment management business in tandem with my CPA firm’s tax and accounting practice in 1996, I have started each workday by reading the Wall Street Journal and watching the “talking heads” analyze the economic and market data that an investment advisor needs to digest as the day’s investment decisions are made. On September 11, 2001, everything that was normal changed.  I will never forget the business news being interrupted by the video of the North Tower igniting in flames; thinking that a small recreational pilot had experienced an accident. Not long thereafter, the South tower was hit, and our world changed forever. No longer were Americans protected on both coasts by massive oceans. Like all Americans, it was shocking watching the non-stop news broadcasts from Ground Zero. Our securities markets were shut down for the first time in history, to control the panic and economic collapse. The destruction of property to the largest city in America and the loss of thousands of lives marked an end to our false sense of security and protected way of life. It would be years before the Country could “pick up the pieces” and rebuild. Only the fortitude and resilience of hard-working Americans would bring our economy and stock market back to the pre-9/11 levels. Although more security conscious, the economy and markets once again began to thrive and grow to new heights.

 September 11, 2023, started much the same way for me as my business news broadcast was interrupted to pay tribute to those who lost their lives over twenty years ago. And, maybe more importantly, considering how important it is to “never forget” as we move into the future. I am reminded that as much as one-third of our current population was born after that fateful day. Those coming behind us surely must learn from the history books and “our stories” that we can never take for granted what it means to be an American. That nostalgia got me to thinking about the next unforeseen catastrophe that shook the world and our securities markets beginning in 2020; that we now refer to as the “Pandemic”. It too, has left its scars on the survivors with memories of being home bound and wearing masks.

 Beginning on January 1 of this year, the Pandemic cloud seems to have lifted due partly to the work of the Fed and their efforts to bring runaway inflation under control. Yes, high prices and high interest rates are still with us, but it appears that the worst may now be over. Our stock market seems to agree as the magnitude of recent returns indicates. I have asked Laura to include the “green line” graph for our Total Equity portfolio below for the period going back to 2000, so that the equity “climb out” of the two most devasting periods in most of our lives can be illustrated.   

 Laura has also produced a “blue line” graph reflecting the direction of the Total Managed Portfolio for all equity and income allocations combined. My point in showing these graphs is to remind our clients that the long-term trend of the managed portfolio is clearly headed in the right direction, in line with the inevitable growth of the economy. The graph also clearly shows the effects of business cycles and the missteps along the way. The obvious biggie being the 2008 Financial Crisis caused by errant decisions at the highest levels of government and business. Another collapse and recovery will surely be in our future, as new policy and geo-political missteps are inevitable. Nevertheless, going back to 1929 and the devastation of the Great Depression, the US equity markets have produced average annual long-term results of ten percent, or more. The Fed’s GDP Growth model now reflects an estimate of third quarter growth in our economy at 4.9 percent.  With the expected growth, we are once again seeing new initial public offerings (IPOs) come to market.  Investment bankers now believe the time is right for companies with a proven track record to take advantage of the anticipated growth in the economy.

 As we are talking to clients about the “new normal” (inflation and longevity), we have been suggesting that with the Pandemic era in the rearview mirror it makes sense to go back to the pre-Pandemic equity/income asset allocations to capture the future returns that are expected to rise up with the anticipated growth again in GDP. And, in many cases, clients are making the decision to increase the equity/risk allocation by five percent (or more) to provide for longer life expectancies. Over the long-term, this “just makes sense”. The two graphs produced below illustrate what those long-term Total Equity and Total Managed Portfolio returns might look like. Each client’s individual portfolio results will differ from the aggregate managed portfolio results illustrated, but the trend line should point in the same direction.


The one-year period depicted as the leading-edge green and blue lines in the above graphs now reflect the post-Pandemic sentiment referred to above. The aggregate managed Domestic Equity Portfolio returned 16.8 percent for the one-year period; with our technology fund returning over thirty percent. The aggregate managed Total Equity Portfolio returned 9.5 percent for the same period; lead by our Alternative Equity position in Iron Mountain Inc. (a REIT providing facilities for security and storage) as the “leader in the clubhouse” returning over forty percent for the twelve-month period. In spite of interest rates on new bonds continuing to climb, the overall Income Portfolio (Bond/CD ladder and Alternative Income positions) returned 5.8 percent for the same one-year period.  Note that the Portfolio Summary Report included in your Portfolio Review reflects the blended equity and income results for your individual managed portfolio.

Our Chief Financial Officer (CFO, partner, and my wife) Jeannie has been blessed with the physical and mental skills to excel on the golf course and has placed well in some Durango level women’s championships to prove it. Celebrating her thirty-ninth birthday (again!), she has acknowledged that women over thirty-nine do not hit the ball as far as the younger competitors. So, we recently went to see what a new set of clubs could do to add a few extra yards. Those new and improved clubs we purchased apparently are “as good as advertised”!

In the process of her being fit for new sticks, I took the opportunity to talk to the manufacturer’s club fitter to see how that worked. I noticed that he had a measuring device on the pad where Jeannie was hitting the ball. Upon inquiry, I was told that the device was an AI machine. The company’s AI machines have now recorded many thousands of hits by many golfers of all abilities. That data has been captured and with the magic of AI, the manufacturer has redesigned its club faces and other parts to produce new clubs that truly do “add ten yards” (or more) to each golfer’s distance. WOW! From observing the bags of clubs that I see when I go to the course, the manufacturer must be “making a killing!” AI in practice!

Our domestic equity fund managers hold an average of approximately twenty percent of their portfolios in technology.  We have historically relied on these fund managers that we trust to deliver meaningful returns and we continue to believe in their active management abilities to incorporate machine learning into their individual fund portfolios.  In the process, our portfolio management decisions will continue to use AI to gather huge amounts of data that we can compress into “real intelligence”, relying on real human thinking.

As of September 30, Intelligent Investment Management, LLP is embracing another transition as Helen Gregory will be moving on to new adventures.  She has been a valuable part of the IIM team and we will miss her greatly.  We also welcome Hannah Gould, who has been working in our office for the last month, training to learn our systems and all that the financial investment industry has to offer so she can assist Laura with operations and client service.

 Please contact any of us as the conversion to Schwab Institutional becomes “real” with any questions you may have.


Intelligent Investment Management, LLP