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Optivest Updates

HeaderThe Most Important Heir to Prepare:
Part 1 of Preparing Heirs Series

I have been helping high net-worth families with their finances for almost 40 years as a professional investment advisor, as a Tiger 21 peer and as a friend. Based on my experiences, after a wealthy family has successfully organized their retirement income for the first generation and helped their children launch, many change focus to preparing their heirs for future inheritance. This is a noble and important task which will likely take decades to conduct properly (I will expand upon this topic in future series). However, the family’s primary concern needs to be preparing the heir who will accede to the responsibility of stewarding the family resources after the head of household passes; most often, this is the spouse. (While I will refer to the “spouse” in this report, statistically the survivor is the female, non-income producer in the marriage.)

In my book, Cash Out, Cash In: The After Success Investment Guide, I wrote a chapter directed toward widows and divorcees who find themselves unprepared. I also recommend reading the chapter on writing a “what if…” letter to your spouse with instructions on practical issues that are not covered in your estate plan. There I outlined how to create a road map of your different holdings and advisors for your spouse.

There are so many elements to consider when planning for your future that it can seem overwhelming; yet, imagine the possible ramifications of not properly preparing your partner. And as we all know, we are not talking about an if, but a when… Here are a few tales of successes and averted tragedies that I hope will encourage you to prepare your precious heirs:

2016 Economic Update

Financial Markets Review by Mark:

First Quarter 2016 Review –
What a wild first quarter! After the stock and corporate bond markets had one of the steepest sell-offs during the first 7 weeks of the year (and the S&P 500 was down over 10%), the markets rebounded to end the quarter virtually unchanged for the year. As frustrating and scary as this was, Optivest clients were aided by our defensive start, purchases on dips and continued advances on our REIT holdings, which collectively resulted in one of our best quarters ever.

U.S. Economy –
The year started off with one of the biggest “false alarm” market scares in years. Worries increased about global slowing/recession, deflation, Chinese devaluation, falling profits, excessive emerging market debt and corporate defaults due to cheap oil. The usual “safe haven” investments – gold, U.S. Treasuries and Swiss Franc – rallied, gaining momentum born from fear. Finally, oil appeared to bounce at about $28/barrel enticing “bottom fishers” who first gave the equity and commodity markets a push, then a retest of the bottom, followed by a 7 week rally ending right back where they started the year. “Safe haven” price gains have held while all of the worries remain, indicating future volatility.

Tiger 21 Economic Insights

Insights from Tiger 21 Conference

Dear Investor: I recently attended my second annual Tiger 21 conference where some of the biggest names in the investment world shared insights alongside 379 private investors of Tiger 21 (whose collective worth is over $40 billion). I wanted to share some valuable takeaways from the headliner speakers with you:

Thomas J. Barrack, Executive Chairman of Colony Capital, Inc. (the third largest private real estate equity fund in the world), arguably one of the country’s greatest real estate investors spoke on current real estate trends:

  • Barrack compared real estate to a slow moving train with large, long cycle moves
  • He reminded the audience that real estate is forgiving, but debt is not
  • The most important aspect of any project is free cash flow and understanding how to change the use of property to create more cash flow
  • He went on to say that the best class A building sitting on Market St. and Main St. in a large city with a AAA tenant has only one way to go – down. It cannot get better so therefore, it can only get worse
  • Barrack also held that credit today is still fairly tight with conservative LTVs, and that supply and demand are roughly in balance. Thus he did not believe that we are in a “bubble” real estate market
  • When asked what advice he would give a young professional he said, “Be able to elegantly withstand pain, work harder, learn more and be prepared and ready to take risks when the right deal comes along”

David Bonderman, Founding Partner of TPG Captial (one of the largest private equity firms in the world), listed by Forbes 400 as one of the 170 wealthiest Americans spoke about today’s economy… 

2017 was a tremendous transition year for Optivest. We added industry veteran Bart Zandbergen, CFP® as Senior Wealth Advisor and Stella Choi, CFA®, CFP® as Director of Portfolio Management who was responsible for implementing our successful risk-based model portfolios for Optivest clients. As 2018 commences, we continue to refine our portfolio models and upgrade our different portfolio software systems to enhance our management and reporting capabilities.

Optivest Economic Update

Financial Markets Review by Mark:

2015 Economic Review –
World markets have been caught between two strong forces: 1. the Federal Reserve’s desire to increase interest rates as a result of an improving U.S. job market, and 2. weakening economies in the rest of the world as a result of China’s deceleration, bringing commodity prices to multi-year lows. The result produced a volatile tug-of-war causing U.S. markets to deliver the worst year since 2008 after dealing with a soaring U.S. Dollar, sinking junk bonds, low yields and crashing oil prices.

Outside of the F.A.N.G.s (Facebook, Amazon, Netflix, and Google), U.S. stocks struggled all year, commodities and emerging markets dropped in sync, liquid alternatives faltered (average hedge fund was down 3%), and old European markets advanced thanks to a devalued Euro and heavy Central Bank stimulus. Interest rates rose, leaving most bond funds with either small gains or losses (including income). 2015 was quite a frustrating year for investors as there were few winners and multiple losing asset classes.

Optivest 2015 Mid-Quarter Market Update

Economic data at mid-quarter is quite mixed. On the positive side: the U.S. stock and bond markets rebounded back to beginning of the year levels; hiring was up in October; and the third quarter GDP was revised from 1.5% up to 2.1%.

On the negative side: consumer sentiment hit a 15-month low this week (on November 24, 2015); the stock and bond markets saw a very narrow rebound mostly from the “FANGs” (companies like Facebook, Amazon, Netflix and Google with high P/E ratios); and revenue and profits for the S&P 500 are headed toward decline for the third quarter in a row. This combination of activity has raised the P/E level of the S&P 500 up to 23 from the 20 level we witnessed over the summer (the long-term average is 15.5%). These mixed signals force us to maintain a cautious stance, avoiding U.S. equities until fundamentals improve. 

Optivest 4Q2015 Newsletter Financial Markets Review by Mark:

ECONOMY:
While both the first and second quarter GDP estimates were revised upward, the third quarter will likely slow to under 1% (according to the Federal Reserve Bank of Atlanta). There is growing concern that worldwide economic weakness will slow the U.S. economy next year. Adding to these reservations, the S&P 500’s third quarter earnings are expected to decline 4.9% (according to Reuters). This would be the second consecutive profit decline since 2009 and subsequently trigger an “earnings recession.” This second decline would be attributed to our strong Dollar, falling oil prices and weak global demand; forward 12 month earnings are also forecast to fall 2%. The probability of a “garden variety” U.S. economic recession (i.e. two consecutive quarters of GDP decline) is increasing.

(As reported in the Orange County Business Journal, September 7, 2015): “…Dana Point-based Optivest Foundation is the only newcomer to the list. It made $604,058 in total contributions last year, with $302,497 of that given to Orange County charities. Optivest is ranked No. 25. It was founded in 2007 and is funded by 10% of the gross revenue of Optivest Inc., Optivest Properties LLC, and Optivest Investment Banking, according to the foundation’s website. It has invested more than $2.3 million in local and international areas since 2007.

By Mark Van Mourick
As reported on CNBC.com, September 10, 2015:

You’ve worked hard and have been very patient, and now you have made money—lots of it.

Like many folks who have experienced a large liquidity event, you’re ready for some immediate gratification. So you are looking to splurge. Perhaps you want to buy a high-end car, a boat or a private jet. You may even look at purchasing a luxury watch. Whatever form of indulgence it takes, it’s a shiny trophy and it’s going to be yours.

Unfortunately, many luxury consumers fail to consider the extent to which their purchase will hold its value over the years. In many cases, buyers eventually decide to resell a luxury item, only to find themselves losing a big chunk of the purchase price to depreciation.

September 9, 2015 Market Update

Overview: Optivest sold their U.S. stock holdings before the August 24th major market decline based on over-valuation and market deterioration. This is only the third time since 1987 that Optivest has de-risked portfolios to this extent. The below report explains our rationale and our future forecast.

Great returns come from great opportunities; weak returns come from weak opportunities. Specifically, forward multi-year stock market returns are directly linked to how over-valued or under-valued shares are when you buy them… READ MORE