Macroeconomic Outlook – Keeping Score

Macroeconomic Outlook – Keeping Score

By Julien B. Booth

May 12, 2016

Periodically we find it very useful to revisit our previous commentary/recommendations and accept responsibility for why it was correct, or not.

Our primary thesis since the end of QE (10/29/2014) has been to own assets that benefit from slow growth, low inflation, and are not dependent on “hope” to keep them afloat; earnings have been contracting YoY after all. Net, net – we recommend buying bonds and bond-like assets: municipals, REITs, preferred stocks, closed-end funds-in secondary market, and some MLPs. You’ll find the next page is the note from Q2, 2015 to this effect.

Wall Street brokerages have totally missed this MACRO event – perhaps driven by their inherent conflicts (sales). It is sad; they hold themselves out as the smartest guys/gals in the room – and still have been wrong on rates for 6+ years.

We take full responsibility for our individual security selection mistakes – generally when I ignore a prudent thought from Dimitri. Additionally, we believe in the “learn to fail fast” school. We will make more mistakes.

However, the MACRO market events are all that truly matter once Central Bank Policy (think currency) dominates. Everyone is clamoring for the illusion of growth (deflate one’s currency to inflate asset prices = growth). These policies are destroying purchasing power for the everyday man-woman. Lower interest rates do not seem to be the cure for anything – merely perpetuating the underlying problems. Either way, we must adjust to the field in front of us.

We have no real clarity into the future and have limited intellect vs. the genius’s that populate the bank/brokerage/insurance company world; however, we do know that understanding MACRO events, investing alongside our clients and low fees are primary drivers of investment returns.

As usual, thank you for investing with Forest Capital! For additional information on portfolio positioning, please contact Forest Capital directly at