A letter from Kori Lannon- Founding Partner/Private Wealth Advisor

Halloween Edition – Edgar Allan Poe on 2020

“It is by no means an irrational fancy that, in a future existence, we shall look upon what we think our present existence, as a dream.”

  • Edgar Allan Poe, “Marginalia”, 1836

Our “present existence”, a dream?  A bad dream, maybe.  Or a nightmare!  Since my aim is not to depress everyone, let’s not dwell on that.  Let’s take a moment to look backward, and then look forward.

I suppose we could parlay “A Descent Into The Maelstrom” or “The Fall Of The House Of Usher” into a reflection on the unprecedented market mayhem experienced by investors in March.  We could maneuver Poe’s “The Gold Bug” to make the case that, although gold performed quite well over the summer, there could still be meaningful upside to the metal in the face of likely additional global stimulus and currency debasement, prolonged low and / or negative interest rates, and what remains to be an abundance of uncertainty.

Some time has passed since our last letter of this kind.  What tricks and treats have transpired in the interim?  We had a 4th of July mostly absent of fireworks.  COVID surged across the sunbelt.  South Dakota hosted the Sturgis Motorcycle Rally during a pandemic.  California and Colorado are tragically burning, and eleven named storms, including Zeta just this week, have pounded our coastal states.  Professional sports leagues squeezed in their seasons in a myriad of COVID-adapted ways.  Schools across the country struggled with how to execute on educating their students this academic year, and have proceeded in countless different fashions.  Many college students arrived on their campuses only to be sent home or locked down.  Social unrest persists in our headlines, if not visibly firsthand in our communities and neighborhoods.  Nonetheless, the S&P 500 continued its melt-up, led mostly by a handful of mega tech companies, and experienced a pullback in September, led mostly by those same companies.  American teenagers (and many adults) universally were spooked by the prospect of their beloved app TikTok ceasing to be accessible (crisis averted).  President Donald Trump got COVID, and quickly recovered under leader-of-the-free-world caliber care.  Kanye joined the race for President (I think), and then dropped out (I think).  In a contentious situation that spotlighted two truly remarkable, intelligent, and pioneering women of law, Supreme Court Justice Ruth Bader Ginsburg passed away, and her vacancy on the court has been filled by Amy Coney Barrett.

This reminiscence brings us to today, back to “The Masque Of The Red Death”.  What is behind the mask?  In this week that features a hurricane, Halloween, a blue moon, and a changing of our clocks, the Dow also sold off 943 points on Wednesday.  Scary.  What will the next several months bring?  I think that many of us are expecting a trying winter.  The news cycle (or should I say “opinion cycle”?) seems to be cueing a “second wave” of coronavirus, which appears logical given the inevitable – as a country, we will be forced to spend much less time outside in open spaces with fresh air.  France and Germany both announced new rounds of lockdowns (or lockdowns-lite) this week.  Next spring will probably be the most welcomed spring of our lives!  With regards to next week’s election, consensus among analysts and experts and witches and ghouls seems to be that the market’s biggest risks lie not in who wins, but in how long it will take to determine who wins.  Will we know by Thanksgiving?

As a firm, we anticipate market volatility post-election, a period that is likely to be marred by controversy, and exacerbated by our “present existence”.  Nevertheless, we are hopefully optimistic over the longer-term.  It will most probably be some time before the economy can find solid footing upon which to build a sustainable recovery.  Reliable vaccines, logistics to distribute them, and the population’s confidence in taking them will be the keys to economic recovery, much of which hinges upon the consumer and employment.  Those things will all take time, but they will come.  The shock and surprise of our initial encounters with coronavirus are behind us.  We are learning to live our lives in a pandemic era, a skill that I don’t believe any of us ever expected to master.  As the saying goes – this too, eventually, shall pass.

“Thank Heaven!  The crisis,

The danger, is past,

And the lingering illness

Is over at last –

And the fever called “Living” is conquered at last.”

  • Edgar Allan Poe, “For Annie”, 1849

Wishing you all a fun and happy Halloween weekend in our “present existence”.   I have heard of some people who will be sling-shotting candy (lob trajectory, I hope) to socially distanced trick-or-treaters, or shuttling the goods down from the front porch through PVC pipe.

Parting advice from me and the ghost of Mr. Poe:  If you do celebrate with some frighteningly fine wine this weekend, please beware any host who invites you down to his catacombs and wine vault to taste a rare vintage from his “Cask Of Amontillado”.



A letter from Herman Rij – Chairman, Quadrant Private Wealth

Reflections of and on Experience

Most of our clients are familiar with my occasional written musings or communications that periodically supplement my annual letter published routinely in the first quarter.  These additional letters tend to arise due to “events of significance”: usually market collapses, sometimes worldly events of potential consequence, or certainly whenever we endure a global pandemic.  Sometimes there are catalysts that may not be so scary, but still compel us to comment on them or share them with you.

I did not wake up on Wednesday expecting that the last thing I’d be doing before going to sleep was putting my final touches on this letter at 11:13pm.  My wife Claire and I are dog people, and we have a loving Golden Retriever, our longest-lived one of many, that we had needed to take for surgery, again, the day before. We refer to Swedie (her father was Sven, a Swedish import) as our “million dollar dog” because she is an enthusiastic athlete with a propensity for injuries that require repair.  She is now 13 ½ years old, and we had nervously wondered whether we would see her again after surgery. (Gratefully and deeply relieved, I picked her up Wednesday afternoon.  Good news.  She is home and recovering.  As are Claire and I.)

I had some commitments on Wednesday morning, so as I set out at 11:30am on my journey to Philadelphia to pick up Swedie from the hospital, I was faced not only with my concerns regarding her forthcoming recovery, but also wondering whether I would make it back home in time in the afternoon.  Quadrant’s Advisory Team and Investment Committee had arranged a 4pm meeting with Byron Wien, a name you may recognize, particularly if you follow business networks or market commentary on television or in print.  In short, at age eighty-seven and still working seven days a week, Byron is a living legend, one of the most revered personalities in our industry.  He is currently Vice Chairman of Private Wealth Solutions at The Blackstone Group, the largest firm globally specializing in alternative investing.  Prior to joining Blackstone, he had acted as Chief Investment Strategist at Pequot Capital, and prior to that, was Chief U.S. Investment Strategist at Morgan Stanley for twenty-one years.  He is Harvard-educated, and has received countless industry accolades throughout his storied career.

Our colleague at Blackstone had extended us the privilege of an exclusive call with Byron, one of the most exciting opportunities of my not-so-fledgling career.  I was afraid that I would not be able to get back in time for the call.  I am happy to report that, despite a tedious north-bound ride on the turnpike, Swedie and I were even home early, and I was able to fully participate in the meeting.  I have summarized Byron’s perspective for you below, but I would like to preface his comments with some additional color.

Wednesday’s Zoom meeting with Byron was refreshing and rather enlightening. Some of you that have been clients of ours for many years, perhaps decades, realize that, like Swedie, I am getting “long in the tooth”. It is rare that I have the opportunity to exchange thoughts with one whose teeth may be longer.

For those of you who do watch the business channels, you see Byron on TV frequently.  He is meticulous in his appearance, always professional in decorum, and what you might expect of a major figure in finance and as a representative of one of the most prominent firms in our industry.  In our Zoom, Byron was wearing a baseball cap because he had allowed the same man who trims his landscaping to give his head a trim that didn’t turn out so well.  Byron was articulate, gracious, generous with his time, humble, modest, and unassuming.  He treated us like peers, and he valued taking our questions as much we valued him answering them.

Thus came the impetus behind the theme of this missive.  This is where the “Reflections of and on Experience” come in.  There is one person at our firm has in excess of 50 years in industry experience – me.  As I mentioned in last year’s annual letter, that metric alone is no longer of high relevance because the cumulative years of experience of the other advisors on our team now beat me by almost a multiple!  In addition, I was struck by this notion:  of equal importance is the fact that in our first six years, Quadrant has been able to forge and strengthen relationships with deeply experienced people, firms, and intellect like Blackstone, Byron Wien, Goldman Sachs, Launny Steffens, Spring Mountain Capital, Laurence Gottlieb, Fundamental Partners, and The Carlyle Group.  We were proud to be a part of Merrill Lynch for 43 ½ years, but in that environment, we could never have been able to access and achieve what we have now for the benefit of you, our clients.

So, thank you for bearing with me.  Without any further delay, what follows is my summary of notes from our one-hour dialogue with Byron Wien.  These are a blend of his perspectives as a representative of Blackstone, and as an investor himself.

These are really confusing times. 

Coronavirus was an unexpected event beyond anyone’s planning.  Its severity was initially underestimated in significance.  

We may have gone through the shortest recession in history after witnessing the swiftest, shortest collapse of asset price in history. 

There are many who believe in a V-shaped economic recovery and that 2021 will be a very strong year. Byron does not see that.  Blackstone believes in a square-root-shaped recovery that is represented by a quick uptick but then with meandering recovery as the world adjusts to the debacle of what has transpired. The initial recovery will last until the fall and then begin to taper off as we address the consequences of coronavirus and all that has come with it.  

People are essentially “fed up” and getting sloppy about coronavirus, which is not good.  Blackstone does not expect a “second wave” of coronavirus, calling it low probability at this stage, but does expect continued bubbling up of hot spots.  There are currently thirty-one states with a rising number of cases. 

There are currently approximately thirty million people unemployed.  Of those, twenty million will get jobs back. Almost ten million will not get their jobs back because the places at which they worked will no longer exist. Although the unemployment rate will fall to 8-10%, the remainder of the employment recovery will be challenging. 

Even people who are able to go back to work will mostly be more cautious when going to spend money.  Many will continue to avoid crowds in restaurants, bars, concerts, sports.  The older segment of our consumer population may wait even longer to go out until there is a vaccine or some kind of pharmaceutical drug.   

Life as we knew it may not come back until 2022.  A vaccine may exist by year-end 2020.  However, testing for validity will take time, maybe eighteen months or more, and then the logistics of getting a reliable vaccine distributed to the general public will take longer. Once the efficacy of the vaccine is established, front line workers will be able to get vaccinated first. There are many moving parts to this dance and parts of it will be sloppy.

 On a global basis, the relationship with China is of paramount importance and one that is difficult to replace. They are our most important trading partner.  It is unhealthy for the world’s two largest economies to be at odds with one another.  It would undoubtedly affect profit margins if we on-shored all manufacturing and production.  The Phase I agreement is moving forward, but the relationship between Xi and Trump is deteriorating. There may not be a Phase II. 

There is a legitimate concern about the level of debt that is being accumulated at the federal and national levels. Currently, spending on economic stimulus is $7 trillion, probably on its way to $9 trillion. It is too much too soon. The fiscal deficit is looking to be $3-5 trillion this year. In 2000, the annual federal debt service requirement was $350 billion at a higher rate on a lower debt level.  Today we have a much higher debt level but the blessing, in this regard, of much lower interest rates.  So the annual debt service amount now is $450 billion. If rates rise, and eventually they will, the debt burden to the government will be incredibly significant and will impact not only how the government is run, but how effectively the economy will be able to operate. 

We are headed for higher taxes.  There is no alternative. If the Democrats take control in November, higher taxes will come sooner rather than later, and the impact to the economy and the markets will be felt sooner than later.  This will be seen in corporate earnings and price/earnings multiples. 

Although Biden is leading in the polls, do not count Trump out.  He has come from behind before, and there are several months until the election. 

With regards to having the virus under control, we are not where Byron expected us to be at this point. We “opened too soon.” We were going to respect social distancing, crowd control, etc. But that has not happened universally…we just do not have it under control. 

Positive view: we are recovering! Earnings will be disappointing until 2022.

Concerns: speculation in the markets is troubling. Current market levels are unsustainable. 

Price of oil will go up; energy stocks have been depressed for too long.  

Precious metals: Gold is in a bull market and going higher because of worldwide concerns – conflict with China, expansion of balance sheet, economic recovery, state of Europe, general uncertainty that abounds. Owns gold personally and will be increasing his shares. 

Negative intertest rates do not makes sense.  Result of too much apprehension, too much liquidity. 

Blackstone is sitting on $150 billion in cash waiting for opportunities. The desirable environment for private equity, private credit and other alternative investments is uncompromised; the key is choosing the right partner. 

There will probably be a pullback in the public markets, perhaps 10%, although 15% would not surprise Byron.  He does not see a revisiting of the recent bear market, but feels that the market momentum is headed towards “taking a rest”.  (I’d like to add a quote from Yogi Berra here: “the problem with the future is you don’t know what is going to happen”.)

In closing, I apologize for the length of this missive.  I was so inspired by our conversation with Byron, as was every member of our Advisory Team and Investment Committee, that I wanted to share his “pearls of wisdom” with you.  We try not to overburden you with our communications, but it is not often we get an opportunity such as this.

When done, Byron volunteered to make himself available to us again. We definitely intend to take him up on his offer.

As always, please feel welcome to give any of us a call.  Just as Byron is not too experienced to learn from our questions, we are not too experienced to learn from yours.



Wednesday June 10th, 2020

From Kori Lannon, Founding Partner / Private Wealth Advisor, Quadrant Private Wealth:

Dear Clients,

It has been about six weeks since we last reached out to you with one of our letters in this format.  Life seems to have gotten much easier.  The equity markets have nearly erased their severe losses of March.  U.S. government-stimulus-to-beat-all-stimulus is bolstering the economy.  The Fed is engaged in a no-holds-barred, whatever-it-takes policy strategy to save the economy.  Re-openings are occurring around the country and the around the world.  Phew.  Nothing but smooth sailing ahead.

If only we could be assured that today’s sense of security is not a false one.  Maybe that is the case.

However, there are many millions of Americans who are suffering still in the wreckage of COVID-19.  Some are the unemployed.  Some are the small business owners who remained shuttered.  Some are the sick, or have loved ones who are sick, or have lost loved ones.  Are there any of us who do not know first-hand someone who has been meaningfully impacted for the worse by COVID-19 and its collateral damage?  Just when we thought we might be seeing a faint and distant light at the end of the coronavirus tunnel, our country and its optimism surrounding re-opening are figuratively shoved in the chest by societal unrest of a magnitude not seen in our country since the 1960s.

There was a column in Barron’s newspaper last weekend by Steven M. Sears likening the behavior of the S&P 500 in the face of all this pain and destruction to an aloof Roman emperor Nero, obliviously playing his fiddle as Rome burned around his palace.  How callous, arrogant, ignorant, and out-of-touch the market is to soar while So Much Is Wrong.  Although, it is said that while the market is an emotional mechanism, it does not have emotions.

I don’t feel compelled to defend the market’s behavior.  I don’t think the market feels it needs defending.  Nevertheless, for me, the Nero reference immediately conjured up another, kinder image involving string instruments in a moment of chaos.  I’d like to try think of the market not as Nero, but more like Wallace Hartley.  Whether you saw James Cameron’s film production of the story or not, you are familiar with the history of the Titanic.  After the vessel hit an iceberg and began to sink, and thousands panicked around him, fearing for their lives, a violinist named Wallace Hartley and his classical bandmates played gentle music, trying to keep the passengers calm as the crew loaded the lifeboats.  It was the one thing Hartley and his colleagues could control, and they contributed what they could to make the best of a very bad situation.  Is this a naïve perspective on the market?  Absolutely.  Because there is such a large percentage of our society that benefits very little, if at all, from any soothing or salve the market’s stellar performance may provide.

Are the magnificent ships that are the U.S. economy and the S&P 500 doomed to go down?  Let’s hope a Titanic ending is well beyond a worst-case scenario!!  The purpose of this letter is not to prognosticate for or against the case for recovery of either.  And certainly not to suggest that we are all about to go down with the ship.

To shoplift an analogy from Lara Rhame, Chief U.S. Economist at FS Investments in Philadelphia, the market and the economy are not one and the same.  However they are inextricably connected to one another, like a kite and the person flying it.  Likewise, at Quadrant, we have an inextricable connection to the market.  As such, I don’t want to think of myself as an extension of Nero carelessly playing his fiddle while humanity suffers.  I prefer to associate with the likes of Wallace Hartley, doing my best to keep the peace in times of trouble.

I do think that we have times of trouble ahead, post-iceberg.  To what degree remains to be seen.  The twenty-two million jobs lost over a two-month period thru the end of April are three times the number lost over an eighteen-month period beginning with December 2007 in the financial crisis.  The U.S. is a consumer-based economy.   Put those two statements together, and I don’t believe we have only smooth waters ahead.

Like Wallace Hartley and his colleagues, your Quadrant team continues our commitment to what we can control.  We are working hard seeking out the best information and perspective available from the world-class resources with whom we have the privilege of working, and we apply what we distill into action, or sometimes purposeful inaction, in your portfolios.

We are living in unprecedented, uncertain, and volatile times.  We continue to wish you and your loved ones health and protection from coronavirus, as well as safety, the blessings of family and friends, and now thankfully, the joys of long sunlit days and outdoor experiences of summer.

Kori Lannon

Founding Partner

Dear Clients,

What you are about to read is an obviously different type of communication than usual, driven primarily by the fact that these are abnormal times.

For example…I have learned that my car now gets 3 weeks to the gallon.  Talk about gasoline efficiency!

I have also realized that there are ancillary benefits to a normal work lifestyle. For example, I used to have to walk to get things done: visit clients, see a co-worker, go to a meeting, get from the parking garage to the office, etc.  Now…I walk from the bedroom, to the bathroom, to my desk, back to the bathroom, sometimes to the kitchen, back to the desk, back to the bathroom. I used to try to meet a goal of walking 10,000 steps per day.  Now the only way I can get those steps in is to ask to use the bathroom of our neighbors down the street.  They didn’t like that.  Thus, my exercise regimen has decreased.

What have we learned about the markets, the economy, and a potential “light at the end of the tunnel”?  Not much is clear.  One example:  guidance that I have seen from economic forecasters over the past week – and these are bright, respected individuals in their field – is for 2nd quarter GDP ranging from a negative 9% to a negative 50%.  (Incidentally, there is a reason that economics is referred to as “the dismal science.”)  Although it is common for these forecasting professionals to disagree, it is normally with significantly less variation from one another.

This week, we endured the enlightening and mind-stretching experience of learning that the price of oil can be a negative number, and that the front month oil contract is capable of dropping 300% from +$18/barrel to -$36/barrel (yes, negative $36) in one afternoon.  Think about this – that means one can be paid for buying oil??  It also means that for a period of time early this week, a roll of toilet paper was more expensive than a barrel of oil.

Please be prepared, since we are discussing negatives…the dismal scientists are suggesting that even the U.S. will be witnessing negative interest rate policy as a result of global developments and our efforts to overcome the devastating economic impact of COVID-19. Think about that – this means we will be paying the bank to hold our money!  Another mind-stretching concept.  Even more weird, at the extreme, as in parts of Europe recently, there exist negative mortgage rates.  This means – wait for it – THE BANK PAYS YOU to take out a mortgage.  So…let’s see, do I buy this small cottage at the beach, or do I go for that big monster on the water?  Hmmm.

Dr. David Kelly, Chief Economist at JP Morgan, made some observations this week related to new growth businesses that may emerge on “the other side” of this bizarre experience. Unfortunately, one of them is marital counseling, and another is an increasing demand for attorneys specializing in divorce.

Thankfully, there are positives to all of this too, although they may not be as readily apparent as the barrage of negatives we are all facing on a daily basis.  Many households are spending more quality time together, absent the frenetic schedules they were keeping before COVID-19.  People are re-evaluating their priorities in life.  Projects are getting done around homes (not mine).  Relationships are being rekindled as people reach out to connect in both an old-fashioned way – picking up the phone, and a new-fangled way – Zoom!  (Zoom and Social Distancing are two terms I use now daily that I had never heard before early March…along with Flattening the Curve, PPE, PPP, and lest we forget the one that started it all, Coronavirus.)

Learning.  From an economic, monetary and investment perspective, we have much yet to learn. There are so many unknowns in this new learning experience:

  • How long before we come out of this?
  • When we get back to normal life, what will our new normal look like?
  • What will be the long-term societal and economic impacts of today’s emergency actions?
  • When will the markets become normal again, and by what will the valuations be determined?
  • What becomes of the college experience? Just as we have discovered that non-commuting can be much more effective than we ever considered, is it necessary to pay for room and board when one can learn at home at a fraction of the cost?
  • Will Clorox wipes and hand sanitizer ever again be on the usual store shelves, or will they be found in the ration-controlled section of the store, hidden behind locked cabinets like weapons, certain drugs, and ultra-expensive wines and liquors of today?

I could go on and on.

One thing is known. We will all be victims AND beneficiaries of PTSD (Post Traumatic Sequester Disorder)!  We will have a fresh appreciation for our freedoms, our liberties, our simple blessings.  Personally, I am tired of Social Distancing.  I miss my friends, my family…those people to whom I am closest. I cannot wait to see them, hug them, love them, and just be with them.  This fiasco has also cost me an expensive hearing aid, thanks to one of those masks that we have to wear outside of the house.  The elastic band that secures the mask can also serve as a slingshot to spiral a hearing aid into oblivion somewhere on Broad Street.

In all sincerity, I cannot wait until I see each and every one of you again.

At Quadrant, we will continue to focus on what it is we are supposed to do.  Although we are uncertain about the future, we are certain about our need and desire to be in frequent communication with you, and to help maintain appropriate perspective in an incredibly challenging time.  Over the last couple of months, we have witnessed the fastest-bear-market-plus in history, the most volatile market month since 1929 as characterized by an average daily market move of over 4% up or down, and one of the quickest 20%-plus market recoveries in history.

As I prepare to finish this letter, I realize that this communication is lacking some “meat on the bones”. It is not for lack of trying.  As I have mentioned before, it is of paramount value having access to some of the brightest, most-informed and well-networked people in our industry worldwide.   Our advisory team is in constant contact with those many resources upon which we have relied in the past:  Goldman Sachs, JP Morgan, Blackrock, Blackstone, The Carlyle Group, and Spring Mountain Capital.  The universal response we are getting is that the future has rarely been more uncertain.  As stewards of your assets, our job is to keep learning in the new world, condense the collective wisdom we glean, and convert it to strategies and opportunities to benefit you.

In all candor, no one in our business has ever lived through something like this before.  The last pandemic occurred over a hundred years ago.  I have been in touch with peers and colleagues of mine who have been in our business for 50 years, and even for us, this is new territory!

As always, please feel welcome to reach out to me or anyone else on our team at any time for any reason.

Have a nice weekend.  My best wishes to you all as we head into Week 6, and the lessons it will bring.


Dear Clients,

As a follow up to last Friday’s communication, we have enacted our business continuity plan and we remain operational. In accordance with Pennsylvania’s closure of all non-life sustaining businesses, we are now operating 100% remotely. Our goal is to minimize disruption to clients, and we appreciate your understanding as subtle adjustments are made to accommodate the new circumstances. When possible, we recommend all clients to direct calls and emails directly to team members and avoid calling the “main” office number – this will ensure faster response times.

Please also find below my latest market commentary, a follow up to the critically acclaimed Chairman’s Letter from a few short weeks ago.

Even Methuselah Died, Part Two:  A COVID-19 Fatality

What an amazingly different world since I authored the prequel to this letter in early March. As in the days following 9/11, the world is a much different place. Most certainly, we will never forget this experience.

As you are aware, for years we have been developing and participating in risk-mitigating and risk-minimizing strategies and investments.  However, just as we learned during the years that bracketed the Great Financial Crisis, when markets are under stress, unanticipated dislocations do occur. Over the past several weeks, we have reached out almost daily to those same resources who have been a crucial part of the development of those risk-management strategies – companies like Blackstone, Goldman Sachs, The Carlyle Group and JP Morgan. These world-class partners of ours represent some of the smartest, most experienced and best informed investing and market minds in the world.  In summary, our collective feedback from digesting all of their perspectives follows below.

What we have recently experienced is without precedent.  After an economy that was producing some of its strongest results only three weeks ago, we are undoubtedly going into a recession within the next ninety days. This message was delivered by stock market performance that had been the longest bull run in history becoming the quickest onset ever of a bear market in history, in only ten days.

Such volatility has created some investment dislocations. Some investments that we considered to be safe havens, particularly in the fixed income market, have acted decidedly less so and provided temporary confusion and disappointment.

History tells us that there are three types of bear markets: cyclical, structural and event-driven. The first two are longer lasting with subsequent longer recovery periods. Event-driven bear markets tend to fall into an average dropdown (market peak to bottom) in the 30-35% range, with an average recovery period of seven-to-nine months. There is no doubt that this one was event-driven by COVID-19, coupled with shocks to the oil market. It is possible that the economic ramifications of the virus will morph this event-driven bear market into a cyclical one, which does not bode for a meaningfully different average drawdown, but does extend the recovery period.  Medical professionals working closely with the government are forecasting that from start to finish, we should expect a very challenging two-to-four months or longer of new lifestyle restrictions and economic slowdown while the coronavirus runs its course in the U.S.  We also know from history that markets tend to anticipate economic recovery with a lead time of approximately 6 months. As a result, the concept of a third and fourth quarter market recovery certainly remains possible.  Of course, all of this is dependent upon the effectiveness with which most Americans adhere to the recommended social distancing and, when needed, self-quarantining.

Regarding our strategies: we still are of the opinion that as the markets stabilize, most of those disappointments caused by severe dislocations and illiquidity will perform as expected when we emerge from the other side of this unpleasantness. The positive news: once out of this cycle, we believe we will be at the beginning of another constructive economic cycle because of the inherent strength exhibited by the economy of yesterday, pre COVID-19, and bolstered by fiscal and monetary stimulus.

As always, please feel welcome to reach out to any of us at Quadrant Private Wealth. We are working hard to operate effectively and efficiently to address all of your needs on a timely basis.

Stay safe and well,



Even Methuselah Died

Methuselah was the longest-living person in the Bible. Depending upon the interpretation, he lived to be 969 years old, give or take a few. In today’s world, we also have some historically long-lived events taking place, although not on a Biblical scale, of course.

The last ten years have certainly been historic. There was annualized double-digit S&P growth over the past decade. Equities are experiencing their longest bull market in history. Interest rates are at historic lows. We are now in the longest economic expansion in history, albeit accompanied by one of the lowest GDP growth rates ever in a ten-year period.  While there is value in reviewing this unique period in history, let’s look forward.

We are entering yet another new decade. However, as the famous philosopher, Yogi Berra, once observed: “It is difficult to make projections, especially about the future.” While the US equity market is coming off a very successful decade, there has never been a ten-year period that followed such a win-streak whose returns were anywhere near as impressive as the first ten. This data does not mean we are taking a doom-and-gloom position on the future. We just continue to emphasize that the need for risk focus and management has probably never been higher.

While there are countless unknowns, I would like to highlight some “knowns” and share some introductions.  2020 will be a benchmark year for me. My career in this industry will be turning 50 years old (another modern-day Methuselah?). Our firm will celebrate its 6-year anniversary in just a few months, hard to believe. In June, Quadrant Private Wealth will have occupied its renovated World Headquarters for three years.

Our firm has grown, patiently. In 2019, we were very pleased to hire the first student who transitioned from our intern program to become a full-time employee. Mike Mittl graduated from Moravian College and joined QPW as a Financial Analyst. Last month, we proudly announced that Joe Flannery had joined Quadrant as a Private Wealth Advisor after a very successful career in sales & finance. Just last week, another former Merrill Lynch team, The Decker Group, became a part of Quadrant Private Wealth.  Dave Decker Jr. and his team, Paul Francis and Mona Campos, bring a valuable dimension of depth, perspective, and talent to Quadrant.  We are so excited to have them aboard.

All of these additions to our firm have something in common. These are genuinely wonderful individuals that have merged into our family. There is no doubt that QPW and our clients will benefit by working with these outstanding people. Part of the “dating process” was to evaluate each other’s philosophies and priorities. The biggest takeaway is our new colleagues’ client-centric focus, a theme that we have propounded since our inception. We happily welcome them all, and deeply appreciate that they are as confident in us as we are in them.

Back to the market, and observations.  As you may recall, my past several annual letters have been themed with a country western song.  This year, I refer to a song by Tracy Byrd: “Ten Rounds with Jose Cuervo”. This song reminds me of the past decade.  The singer had a really tough experience (bear market of 2007-2009) that he wants to forget, and does so by visiting a pub:

  • “Then after three rounds with Jose Cuervo…I forgot what I came to forget”…(Quantitative Easing 1, 2, 3, by the Federal Reserve, 2008-2014)
  • “And after round seven, or was it eight, I bought a round for the whole darn place”…(QE 2019!)
  • “And after ten rounds…I lost count and started counting again”…(New all- time highs S&P, DOW, NASDAQ!)

Just a few weeks ago, before coronavirus struck the world, we witnessed new highs in risky assets.  At the same time, traditional havens from risk (gold and Treasury bonds) also registered records. This juxtaposition is highly unusual, to say the least.

As for the future, remember what Yogi said…Despite Yogi’s wisdom regarding projections, and knowing that even Methusaleh died, there is one prognostication I am unequivocally willing to make as I enter the twilight of my career.  When I reflect upon the founding members of our team, as well as the high quality of character that we have succeeded in adding as we’ve grown, I have paramount confidence in the future of our firm – and most importantly in our capabilities to serve you, our clients, with a rewarding relationship and purposeful stewardship of your assets.

We sincerely thank you for your trust and partnership with Quadrant Private Wealth.


Herman L. Rij, CIMA®





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Jason Cort, President of Quadrant Private Wealth, joins Mindy Diamond on the Mindy Diamond on Independence podcast. Listen below to learn how the QPW team made the leap from Merrill Lynch to independence back in 2014.

The original article can be found here: https://www.diamond-consultants.com/multi-generational-indy-breakaway-story/

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


Alice: “Where should I go?”

The Cheshire Cat: “That depends on where you want to end up.”

What does this have to do with investing? Many investors are asking where they should go today.

Global central bank reactions to the 2008 financial crisis have led to elevated levels in traditional stock and bond markets. By some measures, stock valuations are in the top 1 percent of where they have been historically.

Bond yields are at historic lows and negative in many parts of the world.

The good news is that some investors made a lot of money since markets bottomed in 2009. How much you made likely depended on your tolerance for risk and your asset allocation (or split between stocks and bonds such as 60 percent stocks/40 percent bonds, which is often considered a balanced portfolio).

The bad news is that when you start from a place of high valuations such as today’s, future returns will almost certainly be less than the recent past. Even worse, some studies suggest stocks and bonds both could have returns close to zero the next five to 10 years.

In that environment, your asset allocation to traditional investments doesn’t matter. Progress will be difficult.

Optimists might be tempted to dismiss these words of caution.

However, the job of an adviser is not to predict the future but rather to prepare to make the necessary progress regardless of whether the optimistic bulls or pessimistic bears are proven correct over a period of time.


So, back to the Cheshire Cat’s answer.

If you want to risk making no meaningful progress over the coming years, consider sticking with portfolios dominated by stocks and bonds and manage volatility with an appropriate asset allocation.

Or, if you are willing to try something new in the calculated pursuit of progress, jump into the rabbit hole, escape the traditional and explore the world of alternative investments.


Alternative investments tend to fall into a few categories such as private equity, hedge funds, managed futures, real estate and natural resources.

They are not guaranteed to make money. They can be illiquid, meaning you can’t always immediately get back your money.

They can have high internal fees, and they can complicate a tax return.

Some might even say this advice sounds like it’s from the Mad Hatter.


Yet, alternative investments tend to have a few characteristics that are really desirable, especially if the future is as challenging as some project.

Alternative investments tend to generate acceptable returns regardless of the direction of traditional stock or bond markets. They also frequently exhibit less volatility or risk than traditional assets.

There are a few reasons why these compelling characteristics exist, including:

< The illiquidity premium that investors demand for limited access to capital.

< Alternative investments often are backed by real, tangible things.

< The managers’ ability to be tactical and make multidirectional bets.

Of course, there is more to it than that. But if making consistent returns and sleeping well at night are interesting to you, continue down the rabbit hole.


One of the most successful investing track records of the last 20 years belongs to the largest endowment in the world, the $36 billion Harvard University endowment.

At the end of fiscal year 2016, Harvard’s asset allocation was 29 percent stocks, 13 percent bonds and 58 percent alternative investments.

In a March study by private equity pioneer KKR of New York, it was found that ultra-high net worth investors ($30 million-plus of investable assets) had portfolios that were 29 percent stocks, 25 percent bonds/cash and 46 percent alternative investments.

These allocations to alternative investments are not new and have been developed and refined for decades.


Ultra-high net worth investors and institutions such as Harvard used to have an advantage over the average investor.

Access to certain alternative investments used to be limited to those who could write a $5 million check. Fortunately, minimums have been falling and access improving for the typical investor.

An investor now can access some of the world’s most accomplished managers for as little as $50,000 if certain reasonable net worth or income requirements are met.

There are now alternative investment mutual funds with minimums of $1,000 and no meaningful suitability requirements.


There is no “right” asset allocation, as every portfolio should be determined after considering risk tolerance, liquidity needs, growth needs and tax status.

Furthermore, there is no “right” allocation to alternative investments.

It’s doubtful that a 58 percent alternative investment allocation such as Harvard’s is appropriate for an individual.

But in most circumstances, a 10 percent to 25 percent diversified alternative investment allocation is worth exploring, regardless of one’s bullish or bearish feelings toward traditional stocks or bonds.

Jason Cort of Center Valley is president and a founding partner of Quadrant Private Wealth, Bethlehem. His specialties include investment strategies designed to mitigate risk without sacrificing return, as well as liability management and estate planning services. He can be reached at jcort@quadrantprivatewealth.com or 610-849-2740.