I asked Michael McGreevy (see photo at right), Managing Director of the Indian Wells office of .jpg)
Private Asset Management, and past president of the Desert Estate Planning Council to do a Q&A with me to get some clarity as to what is going on with the markets, and whether there are things the average investor can be looking for, or doing right now, to strengthen their investments.
As a background, Private Asset Management produces an in-depth yearly Outlook. It was after reading the latest edition that I was inspired to do this Q&A with Mike.
DB: Mike, I really enjoyed reading over the 2009 Outlook report, especially when it starts out with the following strong paragraph:
“The Global Economy and Markets in 2008 were truly one for the record books. While conducting our due diligence for our 2009 Outlook and Sector Strategy Report, we took a look back at the events over the last year and were truly amazed. Events that were statistically impossible, became possible, and, even more, they became the norm. This has resulted in many shell-shocked investment professionals and investors. The standard playbook of looking to history as a guide is no longer valid, because events that are occurring have never occurred. That being said we find solace in our unshaken belief in the American entrepreneur and the ability of our economy to face challenging times and emerge stronger.”
While I feel I have a pretty good handle on financial terminology, I still found myself learning more about financial concepts, like those I hear about on CNBC or read in other investment articles, when I was reading over your firm’s report.
One of the concepts or themes I found throughout the report was the reference of 2009 as a “transitional year.”
Can you tell me a little more about what this means?
MM: We contend that 2009 will be a “transitional year” because we believe that the economy will be working away from contraction and toward expansion.
DB: When I think of transitional, I think of change, yet some people think the best move is to just freeze up and not do anything until the economy improves. What are your thoughts?
MM: Doing nothing is, in our opinion, the wrong approach to the problems we are facing. We would argue that investors should be aware of the opportunity to selectively invest in a variety of assets while current valuations are significantly below that of historical valuations. Our examination of current and historical valuations leads us to conclude there are some extraordinary investment opportunities available at this particular moment in time.
We can, of course, argue all day long about whether the market has hit bottom. However, if you will put that argument aside for the moment, we can make a strong case for investing at a time when great values abound. We believe that these investments will produce strong returns as the economy and the markets recover.
Speaking specifically about equities for the moment, as the economy recovers some stocks will improve more rapidly and to a greater degree than others. That means that some stocks and some sectors of our economy are a better bargain than others.
Our job as an investment advisor requires that we study the global economy with an emphasis on understanding emerging economic trends. Once emerging economic trends have been identified investment dollars are allocated accordingly.
If emerging economic trends are likely to have a negative impact on an industrial sector we would underweight when investing in that sector. If emerging economic trends are likely to have a positive impact on an industrial sector we would overweight when investing in that sector. And in the case where emerging economic trends are likely to have no impact on an industrial sector we would have a weighting that is roughly equal to that of the S&P 500 in that sector.
Use of an analogy from the game of hockey will help me explain what I mean. Just as a hockey player must always skate to a place on the ice where he thinks the puck will be, we as investors are always striving to invest in a way that allows us to benefit from emerging economic trends.
DB: That makes me think, can people always tell exactly what is going on from the financial statements they receive from their investment advisor/broker?
MM: That’s a very good question. Some statements that come across our desk for review are very difficult to read. Many appear to be designed to confuse rather than inform.
At this point it may be helpful to state that Private Asset Management believes in transparency. Our clients own publicly traded individual equity and bond securities. We do not produce or sell any proprietary products. As such, we have no motivation to invest in anything other than securities that we believe are a good value.
When you get a statement from us, it is very easy to read and understand. Some accounts that we manage hold Exchange Traded Funds. These are usually purchased for reasons pertaining to diversification. However, as a rule, we would agree with advisors contending that if an investment cannot be understood it should be avoided.
DB: You mentioned transparency, management fees, etc. Could you describe the various ways that financial advisors may charge fees.
MM: Although you may feel uncomfortable doing so, the most important question that you can ask of an investment professional is “How are you compensated?”
If, when asked this question, your advisor starts tap dancing like Fred Astaire, you should be concerned. Many of the products that investment companies sell are loaded with hidden fees. Some companies make money when trading for your account. That can lead to the ‘churning’ of your portfolio.
Our firm earns a fee for management. That fee is based upon the value of the portfolio. As such, our interests are in alignment with that of our clients. Our revenue increases as our client’s portfolio increases in value.
If you are an investor and you are doing all your own research you may be emotionally involved in you decisions. This can lead to mistakes. Or, if your research is not as thorough and conclusive as the research performed by Private Asset Management, you could be making bad investment decisions.
Private Asset Management was founded in 1992. Our performance record dates back to January of 1993. We are very proud of that record and, as such, your readers are most welcome to contact me for a performance review.
DB: Mike thanks for your time and I appreciate your candor on this timely topic.
This is the general Disclaimer that is posted at the link for the report mentioned in this Blog. Disclaimer: The material presented is of a general nature and not constitute the provision of investment or economic advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions and forecasts expressed herein are subject to change without notice. Relevant information was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy. You should seek the advice of an investment professional to tailor a financial plan to your particular needs.
