Annual Letter from the Chairman: Reflections, Review, and Renewal – January 2018
January 8, 2018
January 5, 2018
To our Clients, Partners and Friends:
It is that time of year when we usually try to do two things at the same time. We look back over our shoulder and ask: what just happened? Sometimes we contemplate about what we did, and perhaps what we should have done differently. Finally, after we come to the realization that there is nothing we can do about it, we begin to look forward, set some goals, and sometimes, make promises.
Allow me to extend to you from all of us here at Quadrant Private Wealth our wishes for a healthy and “Happy New Year.” It is difficult to comprehend that yet another year has passed us by. In all candor, it is difficult for me to come to the realization that at some time this year, I will begin my 48th year in the financial advisory sector. One might have thought I would have learned more during the previous 47 years. The truth is, this is a humbling profession. For some reason things don’t always work out as we had planned.
What a year 2017 turned out to be! The stock market had positive returns every single month. Not only that, but as of today, we have had 381 trading days without at the very least a 5% pullback. If this continues until mid-February, we will have the longest such streak since 1928. In fact, according to an analyst upon whom we rely, 2017 represents the lowest year of adversity in over 100 years. What could possibly go wrong?
In the bond markets, interest rates were predicted to begin going up. Well, partially that is true. The Federal Reserve did raise short-term interest rates multiple times, but those are, and I am calling them, “manufactured moves.” In the actual market place (i.e., those rates which are determined by buyers and sellers), interest rates have been surprisingly stable.
What else has taken place? For one, our clients have rewarded us with loyalty as reflected by assets under management (AUM) growth to an all-time high. We are very pleased that many of you have now been clients for decades. Several of you are approaching 40 years, with many more at 30, and an astounding number in the 20-year range. Yes, we also have teenagers, but we are equally grateful for those who are in their infancy as well. To you all, we promise to continue to work at improving upon all components of our relationship with you. As stated last year, we take nothing for granted.
Some other significant events transpired this year. Quadrant Private Wealth finally moved into what we hope to be our permanent home. If you have not yet had a chance to do so, please come and visit. We are quite proud of it.
Speaking of significant events, how about a few hurricanes – Harvey, Irma and Marie? Something else that blew in with the hurricanes was Bitcoin, which is now a current part of our terminology along with its companion phrases of “blockchain” and “cryptocurrency.” Of course, I continue to be challenged in trying to get a grasp on any of them. By the way, something else does not make sense to me: tattoos, body piercings and negative long-term interest rates. All of the above appear to have gone beyond their “past due” dates, but perhaps, I must just be showing my age.
As we look to 2018, we know there are other potential events of significance: NoKo, Iran and the continuing dysfunction in our federal government. Any one of these has the potential to upset the apple cart. Of course, there is the other category…something else.
In summary, it has been a great year. Can it continue? Possibly, and certainly, we hope so. Although equities are expensive by historical measures, there is no reason why they cannot become more so. Momentum is a powerful phenomenon! However, we will not lose our perspective of managing for the “upside” while trying to protect against the “downside” risks that will always ride “shotgun” in any investment environment. In fact, because of the recent “upside” strength, we remain cautious.
Finally, as part of the review process, I would like to acknowledge that several of you have celebrated significant milestones this year. Although we may cringe at these accomplishments, it is better than the alternative. I am also proud to acknowledge that Claire, my wife, and I celebrated our 50th wedding anniversary. Yes, she is a saint. Another anniversary that we will also be recognizing soon is the fourth year anniversary of the founding of Quadrant Private Wealth. More importantly, 2018 will represent another significant milestone. The cumulative experience of our “younger” financial advisors will exceed 52 years, obviously exceeding my own. That is important because that experience is critical in making the correct decisions for our clients. So our final milestone will be an excess of a cumulative 100 years of investment guidance.
Allow me to leave you with some lyrics from of one of my favorite country western songs by David Lee Murphy called “Dust on the Bottle.”
There might be a little dust on the bottle
But don’t let it fool ya about what’s inside
There might be a little dust on the bottle
It’s one of those things that gets sweeter with time
I have always thought about that as a commentary on some of our “aging” friends, and, of course, friendships. It could also pertain to the investment markets themselves. Records are records for a reason. Therefore, when a “record level” is reached, it is not the beginning but rather an indication of the maturity of the cycle.
Stay tuned. We promise to keep you informed.
Herman L. Rij, CIMA®
Founding Partner, Private Wealth Advisor