September 30th, 2015
Gordon & Broad is a place where private businesses seeking capital intersect with families seeking investments. G&B is part owners of Rugosa Partners , a private fund looking for innovative companies to invest in. Both companies have portfolios well diversified, with investments in different sectors of the economy, and at different stages of maturation.
Have a great rest of the week…This letter is a quick read…
It has been quite awhile for readers of the G&B newsletter to hear me with a Bullish tone. Maybe never… The U.S. Eonomy does deserve some kind of respect for handling the constant outside pressures – whether it be geopolitical fears, the European Debt Crisis, and now the Emerging Market Debt Crisis, we seem to keep trucking along. That concludes my bullishness tone.
This amazing resilience cannot last much longer. The EM Debt crisis will spread over here at a vulnerable time (Guess it already has), likely the reason the Fed did not raise rates again. We were correct to be in cash as we wrote in our last few letters, but also to go bottom fishing. Bottom fishing has worked even though we are approaching 1820 on the S&P 500, the lows of August. Any given security or risk asset can overreact during nasty markets like this. That is when you can sweep in and buy. Facebook was a great example – on the Monday where the market opened nearly limit down, $FB was trading in the high 70’s! That was a place to buy. There are many other examples – like the one I mentioned in my last letter, Exxon Mobile at $66 on that Monday in August… But even though there are some buys out there everyday, in general, this is a bear market that will likely lose you money if you are not active and not keeping much of your portfolio in cash. That said, if i had to guess, we are closer to a bottom than not, so get your watchlists ready.
I mentioned in a previous letter about corporate balance sheets and their problem: they are raising tons of cheap debt and using it to pay dividends and buy back stock, hurting their true value. This is proving to be a really good theory. Junk Bonds are collapsing as I write, as well as their equities. The problem is not oil prices or company models, it is their debt. This energy crisis is looking more like another debt crisis. This shouldn’t come as a shocker to anyone who read’s the G&B newsletter. It is also showing up in media bonds. Companies going out to get cash in the bond market are paying higher rates, whether they are services exsisting bonds or issuing new bonds.
Glencore has 2/3 the size of counter party risk as Bear Sterns. Just energy debt. Glencore Credit Default Swaps are trading as if they are on the brink of bankruptcy. The reason I bring up credit is that this is the real problem in global markets. We never solved or completely washed out our debt issues. We actually just added to them. We printed more money, we created FHA loans instead of Fannie and Freddie, and now we are subject to massive debt problems in the energy sector. There are more examples like Puerto Rico, like Europe, etc, etc…
G&B has built a portfolio that we are excited about. The best way to show this is through the illustration I put together here. This could not be possible without Rugosa Partners. Please click our link if you have not yet. We are a very interesting group in that the three partners, Jozef, Steve and I, all come from different backgrounds and have diffrerent trains of thought. This is powerful in due diligence. If you need help with due diligence on an investment, we are the group to come to.
Nutrition: State of the Art Secrets and Success with Nutrients, Suppliments and Foods – for your mind and body
Exercise: Quick Routines that give you more results than long overtraining
Finance: The Capital Markets broken down, and actionable trades to make money.
Art: Music, Art and Creation has always been a part of my family and my life, so sharing secrets and my latest adventures can only be interesting.
Robinhood – Free Stock Trading
Take advantage of a new age free stock trading application, Robinhood. Those of you who make the argument that stock trading commissions are too high, sign up with Robinhood. All stock trades are free. The application is very user friendly. Find out more on deweyknows – nice to see financial technology start to evolve. This will be a big trend moving forward. Don’t forget about Wealthfront as well, an automated wealth management platform with far less fees than standard brokerage houses.
Source: Dewey Knows