Dear Clients & Friends,
We wanted to send you a quick note as we live through another historic day in the story of our global economy. The global reaction to the BREXIT decision (U.K.’s referendum to leave the European Union) is causing a plunge in world stocks today. We believe your portfolios are in a good position to weather the volatility.
As you know, we took a 12-14% cash position as of December 30th and 31st, 2015 in an effort to be more conservative in an increasingly volatile and uncertain time period. We have not reinvested this cash and will not until the BREXIT and other uncertainties we’ve discussed over the last few quarters are clearer in their outcome.
We look at the volatility created by these uncertainties as a potential opportunity if you can stay unemotional! As I look back throughout the history of All Star Financial, we’ve been through nearly 20 similar historic days where global markets have panicked in response to a significant global event. We will use this experience to reinforce our discipline of focusing on value and fundamentals and we will NOT sell into this volatile market. We will be patient and look for the right opportunity to come our way. We will focus on making sure that the portfolios that you are using for your different accounts are managed at the correct risk level for you and your goals. We believe this addresses the more immediate issue of liquidity. Our more conservative portfolios have enough cash position and bond exposure to provide for the cash needs of our clients for several months (if not years for some) without needing to sell equity positions that may be heavily discounted after this event. This market cycle will require some patience as the long term impacts of this decision are realized and the emotion of the decision flushes through the markets. We look forward to working with our clients to help them make decisions that are best for their short term cash needs as well as their long-term investment returns.
The global economy these days is increasingly complex. Central banks, currencies, immigration, oil, China, interest rates, regulations, etc. all have an impact on corporate earnings and ultimately the trajectory of our global markets. Our discipline and experience suggests that risk-adjusted diversified portfolios will continue to be the most efficient way to achieve long term portfolio returns that provide liquidity and help maintain the purchasing power of your dollar. On days like today we definitely can feel the emotion of investing, but as professional money managers we stick to our convictions about the best way to help you, our clients, achieve your financial goals.
Please don’t hesitate to reach out to us with any and all questions.
Bob Klefsaas and the All Star Financial Team