I hope this note finds you safe.
Happy Mother's Day 2020. In a world gone mad, Mothers are the constant that model kindness, integrity, and immeasurable unselfishness. Thank you.
The world is going over the waterfall of change. We have attempted for some time to provide our insight...but it is often hard to understand until it can be seen.
1. Rates have been pinned to 0%, and Federal Funds futures have even priced negative rates.
2. There is an absolute tragedy in the Labor market, 24+ Million job losses.
3. The crisis from late March has ebbed as the Federal Reserve will be buying most anything in the bond market.
4. Economic performance has been so poor that charts cannot even contain the declines (must be resized).
5. Oil and other industrial commodities have seen tremendous negative volatility.
6. Stock markets seem content that earnings are not important - only the actions of the Federal Reserve.
7. And, we have not even been freed from lock down yet!
I am so grateful to have been raised in the 1970's. Things were not easy at my house with a single mother, no air conditioning, and a Ford Pinto in the drive.
It built character, resilience, and durability - and we know how to grow/raise our own food.
Our portfolios are built for durability. As things "normalize" the great chase for yield will return. Anyone with a need to asset-liability match (pensions, insurers etc.) will be forced to chase anything with positive yield.
The positions we hold are durable and can withstand the reality to come. Pricing will recover in due course, in the meantime dividends/interest payments are safe.
Thank you for your interest. We appreciate the opportunity to work for you.