With heartfelt appreciation for our relationships with clients and friends,
we wish you and your loved ones a very Merry Christmas and Happy Hanukkah.

  • Last week saw two IPOs deliver dramatic pops.  Food deliverer DoorDash gained 86% on day one and Airbnb surged 113% on its first day of trading.  Only eight IPOs have doubled or better on their first day since 1995, including five this year alone.  IPO behavior is starting to look very frothy and smacks of “irrational exuberance.  ”We hope it doesn’t spill into the broader market.  It hasn’t yet.
     
  • The recent rotation out of some of the FANG+ names is attributable to profit-taking in our view, rather than concern that the rationale for tech stock investing is running out of steam longer term.  The ubiquitous nature of technology is embedded across broad segments of the world economy, including business, the consumer, and government entities.  Consumers’ relationship with technology appears likely to broaden further with the introduction of 5G, increased use of technology in the workplace and home, and an upgrade cycle tied to a world of technology innovation.  Tech is becoming more accessible and affordable.  We will continue to overweight technology stocks.
     
  • As you would expect early in an economic recovery, profit growth expectations for cyclical stocks are eye-popping, estimated at 70% in 2021 and 30% in 2022.  Cyclical stocks have caught fire since Pfizer’s (and others) early November announcement about their promising vaccine combined with expectations that the economic rebound will continue.  The bar chart below shows profit growth expectations for select categories of the market:

Sources:  FactSet, Standard and Poor’s, Thomson Financial, and CreditSuisse.
 
Also, value stock profit growth is expected to outshine growth stock projections.  This is all textbook early cycle behavior and gives us confidence the new bull market is in its early stages.  Of course, there will be many corrections along the way just as there were in the March 2009-February 2020 bull market.

THE 60/40 PORTFOLIO STRATEGY WINS AGAIN – AND MUZZLES CRITICS

A balanced portfolio of stocks and bonds was among the few respected rules in investing for decades.  Yet doubts about the approach grew after the pandemic hit and turned 2020 into a year like no other.  Critics of the 60% stocks/40% bonds portfolio were quick to pounce on the fact that interest rates are low and likely to stay low.  As a result, the fixed income portion of the portfolios may provide little return.  Instead, critics advise the 40% traditional fixed income portion should include REITs, MLPs, junk bonds, preferred stocks and the like – mostly higher risk choices in an effort to juice returns.  This doesn’t make sense in our view.  Balanced portfolios are meant to be just that – balanced.  Traditional bonds provide an effective offset to stocks.  Bonds are more stable and provide ballast for portfolios in rough waters – even if today’s yields are low.  We think if an investor wants to take more risk in the 60/40 portfolio, we suggest increasing the equity ratio rather than adding these alternative equity-like investments.  The potential rewards are greater.
 
How has a 60/40 portfolio done this year?  It depends on the types of stocks and bonds held (including maturity length).  Using index returns, a 60/40 portfolio holding longer bonds is up about 10-11% YTD, and 8-9% for a portfolio holding shorter-term, higher-quality bonds.  Even the critics agree these are attractive returns.  Traditional balanced portfolios still work.

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Real Retirement Solutions

designed to improve
  • Wealth Preservation
  • Management of Risky Assets
  • Peace of Mind

This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

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Professional Expertise

Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

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Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

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Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

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