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2020 Newsletters

Alpha (beyond average market returns) will now come from active security selection and emphasis must be given to credit analysis. Passive investing will inevitably expose investors to zombie companies. Expect mandates to not be fully invested at times setting up for tactical nimbleness to take advantage of dislocations ahead.

There are good times ahead for investors who have prepared for the risks and opportunities ahead. Beyond the pandemic and the election, the low-interest rate environment and likely negative real yields for years to come will drive the unprecedented and massive $4.3 Trillion currently held in money market funds back to the markets seeking returns from the only places it can safely be sourced – actively managed equity funds, stable cash flowing real estate and private lending to high credit borrowers when banks won’t be able to lend because they find themselves laden with defaults, loads of lower credit borrowers and diminished spreads.

We are excited for the future and we look forward to guiding you to achieve your long-term goals.

Respectfully,

Leslie, Matt & Ryan

The bear market of March 2020 has been the quickest to recover to bull market in history. The market has rebounded from its lows in March and the technology-heavy NASDAQ is hitting new all-time highs in the midst of the pandemic. This recession was not caused by over-exuberance or by a bubble but rather by an exogenous event. While the landscape coming out will look different, we believe that we will enter a new paradigm in the economy where strong and innovative companies will thrive, over-indebted and weaker businesses will fail and there be a greater push than ever for US-domiciled supply chain independence and nationalism. Staying invested with minor tactical modifications will prove the best method for generating steady returns and upside participation as the good times, we all so dearly look forward to outweighing the bad. At least in the stock market.

Stay healthy and stay optimistic. Long-term goals are still achievable.

Respectfully,

Leslie, Matt & Optivest’s Investment Department

No one knows how quickly public-health officials will contain the coronavirus. The situation remains very fluid as rescue checks to taxpayers and loans to small businesses and self-employed parties are still in the works. There is likely another round of fiscal stimulus coming and we hope it works to assist borrower workouts with lenders.

Our strategy for the next couple of months is to reenter the stock market with the cash we raised early in the market drop as well as proceeds coming in from recent real estate sales. We have gotten a technical signal that we are in the clear for the market to recover. We already see a great recovery on NSA which we added to in the mid-’20s during this bear market and the preferred stocks we nibbled at. Gold has done really well to date. Going forward, we are buying individual stocks with strong credit and healthy balance sheets and are well equipped to thrive in a normalizing economy and have solid cash positions to survive a credit-constrained environment. We are also moving cash into our US-centric growth strategies as we continue our focus that the US is the most innovative and dynamic economy. Some reassuring stats to keep in the front of your mind:

The US will likely lead the charge to create a vaccine against COVID-19 and can look forward to seeing all our loved ones again soon. We will continue with our weekly news blasts to keep you apprised of our thoughts and progress. Through all of this, we encourage all of you to remember your long-term goals, be well and stay healthy.

Respectfully,

Leslie, Matt & Optivest’s Investment Department