Broker Check

September Newsletter 2023


August 25, 2023


Dream Big. Invest Intelligently.

Most of us know someone that was in the line of wrath from the recent hurricanes and the horrific fires in historic Lahaina. So far, we have not heard of any loss of life from our contacts, clients, and friends in those areas. Our hearts and prayers go out to those less fortunate, as friends and family are left to pick up the pieces. Our investment portfolios include exposure to both farmland and utilities; and, although all related investments have been, at least temporarily, impacted, we have not seen any direct news of our specific investments incurring any losses. Our broad diversification philosophy is meant to minimize the impact of any one loss overly impacting the entire portfolio.

As I listened this morning to Fed Chairman Powell’s comments on the economy and the continuing plans to rein in inflation that has so severely impacted daily lives, I couldn’t help but feel that the end is in sight (even if it is not until 2024) and that the economy will once again return to sound footing as both individuals and companies adjust to the new realities. Our markets are already one step ahead as there are more “up” days than “down” days. On a total return (growth and income), year-to-date basis through August 24th, our managed portfolio of equity positions has returned over five percent; well on the way to our more normal and historic return on equities of ten percent, or more on an annual basis. Income categories have returned well over three percent on the same basis. Just the cash flow yield from dividends and interest remains at just over five percent. It wasn’t that long ago, as we endured the Pandemic and post-Pandemic era, that we were pleased with total returns of even less than five percent. In any event, we have re-evaluated all client portfolios and have adjusted most portfolios to their pre-Pandemic asset allocations to get “back on track” with the growth needed to meet long-term goals.

Laura has prepared the “Green Line” graph below depicting the path of our managed Equity Portfolio from January 1, 2020, through August 24, 2023. The average annual equity return for the entire Pandemic and post-Pandemic period is just over five percent.  As noted, our year-to-date equity return is already over five percent.  

The merger of TD Ameritrade into Charles Schwab is moving forward rapidly with the Labor Day weekend targeted for the conversion of all client accounts. We will be fully operational on the new Schwab Institutional platform on the first trading day after the Labor Day holiday. Laura and her team have been working tirelessly behind the scenes to achieve that goal. James and I have been getting acquainted with the new platform and the many tools it provides for our use. In particular, I have been impressed with the insights and analysis that we have available to make the day-to-day decisions necessary to maximize the results for our clients. One example of the information we have available to us is the following excerpt from a recent sentiment survey:

(BUSINESS WIRE) -- After two consecutive quarters of recession anticipation, trader expectations are shifting to a more optimistic sentiment overall about the market environment. The latest Charles Schwab Trader Sentiment Survey reveals that traders are more bullish on the U.S. stock market than they were in the second quarter; for the next three months, 44 percent are bullish, and 35 percent are bearish, compared to 32 percent bullish and 52 percent bearish in the second quarter.

While most (69 percent) of Schwab’s trader clients still think it’s likely that the U.S. economy will officially enter a recession, that figure is down significantly from 86 percent in the second quarter and 87 percent in the first quarter percent. Those who think a recession is likely are also pushing back their expectations for when it will begin and continue to believe it will last less than one year. Among traders expecting a recession, 64 percent now predict it will start in the fourth quarter of 2023 (26 percent) or later (38 percent) compared to just 19 percent who predicted a recession would begin in that timeframe last quarter.

“While traders certainly don’t feel we’re entirely out of the woods yet when it comes to an economic downturn, we’re seeing an influx of cautious optimism,” said James Kostulias, head of Trading Services at Charles Schwab. “This is no doubt thanks to a sunnier economic picture overall this quarter. The jobs market may be cooling somewhat, but it continues to be strong, and unemployment remains remarkably low, especially compared to pandemic-era highs. Even the most recent inflation numbers, while they do indicate a modest rise, are a far cry from the highs we saw in 2022. Concerns may remain, but bullishness is on an upswing.”

James and I share these conclusions and are moving forward accordingly. We do believe that “brighter days are coming”.

I spent last weekend with my grandkids in Telluride enjoying the mountains and all their beauty. My granddaughter is entering high school and beginning to think about “what’s ahead” as evidenced by her thoughts about life in the future. We talked for some time about finding her “passion “and the need to develop the skills that can only be honed from the time and dedication to a college curriculum at a top-notch institution of learning focused on learning “how to think”. I could see the “wheels turning” as she pondered the opportunities in her future. The challenge for our family is providing those opportunities without breaking the bank. With a clear view of what the college loan crisis has done to both our youth and their parents, she is focused on achieving all she is capable of while still in high school to enable her to obtain all available financial help along the way; just as she waits tables to pay her share of the total cost.

As the cost of college increases at more than the cost of living, we are talking to more and more parents and grandparents about planning early for those costs by investing with a goal of helping our kids meet their future goals without incurring excessive college loans. We have helped with tax-advantaged 529 plans and investment portfolios designed just to meet those future goals. Jeannie and I recently focused on such a plan for our seven-year-old grandson with the goal of being able to ease his future burden. It is too early to know what his “passion” will be, but he recently told me that he knows how to do everything already! Time will tell, but we will be ready.

News from the office is that my business and life partner, Jeannie, will soon be living her passion in September on stage at the Durango Arts Center in one of the leading roles in The Odd Couple (women’s version) by Neil Simon. If you would be interested in seeing her at her best, please call the office and we will arrange for a couple of tickets for your use.

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



Intelligent Investment Management, LLP