Strubel Investment Management’s commentary for the month ended November 2020, discussing a divided government scenario for the next two years.
Q3 2020 hedge fund letters, conferences and more
Dear Investors,
Happy Holidays! In the spirit of giving and receiving, the CARES Act that Congress passed this summer may provide you with extra opportunities. First, the Act allows IRA account holders to pause in 2020 from their required minimum distributions. You may leave your money in your IRA. You are not required to take out your minimum distribution this year. Obviously, you can still take distributions if you desire; however, you have the option of not taking any for this year (2020).
A Divided Government
Now, on to our regular programming. At this point, the results of the presidential election seem settled. We still have two senate run-off races in Georgia later this month. There aren’t many polls for the race but the few we do have shown the Democrats with a very narrow lead in both races. Given the magnitude of polling errors we’ve seen over the years and the fact that the Democrats in one of the races finished six points behind the Republicans, I don’t think it’s likely the Democrats will pick up both seats. Even if the Democrats do pick up both seats, they would need to abolish the filibuster in the Senate to get anything of note done.
The most likely scenario then, for the next two years, is a divided government with a Democratic-controlled House and Presidency and a Republican-controlled Senate (and Judiciary, if you want to consider the Supreme Court a political body). Given the split, we are unlikely to see major landmark legislation passed that will greatly change the current environment. With the absence of any major changes, it’s likely that the investment strategies and themes that worked post-2008 will continue to work the next two years.
Once COVID fades (or a vaccine is distributed), we are likely to see the recovery pick up steam. Then we should see the same slow, steady, economic growth with low inflation that we’ve seen for the past decade. Obviously, things can change. For now, there are doesn’t appear to be any reason to drastically alter our investment strategy for individual stocks or client portfolios as a whole.
Analytics Solution For Financial Filing And Company Earnings Transcripts
On a different note, I’m excited to announce the completion of a project I’ve been working on over the past year. As many of you know, my previous background was in technology. The technology field, particularly the rise of machine learning and its applications to the world of investing and finance, has always interested me. I’ve been working on validating, testing, and implementing a number of financial fraud detection and stock performance algorithms from almost a dozen academic papers into a custom, real-time analytics platform. I have created a custom analytics solution that automatically saves and processes every new financial filing and company earnings transcripts. It analyzes them immediately, and presents the results to me in a custom dashboard. For my clients in the tech industry who might curious, I implemented everything in AWS using a combination of Python and Java.
I also want to give a big thank you to my summer intern, Natalie. This summer, she helped research, gather data, and even build some of the initial models. I’m very proud and thankful for all her work this summer. I’m so excited that she had her choice of job offers this fall, in part, because of her successful internship with me. Having a choice of jobs during COVID is something for anyone to be proud of! And I am very proud of Natalie.
Disclaimer
Historical results are not indicative of future performance. Positive returns are not guaranteed. Individual results will vary depending on market conditions and investing may cause capital loss.
The performance data presented prior to 2011:
- Represents a composite of all discretionary equity investments in accounts that have been open for at least one year. Any accounts open for less than one year are excluded from the composite performance shown. From time to time clients have made special requests that SIM hold securities in their account that are not included in SIMs recommended equity portfolio, those investments are excluded from the composite results shown.
- Performance is calculated using a holding period return formula.
- Reflect the deduction of a management fee of 1% of assets per year.
- Reflect the reinvestment of capital gains and dividends.
Performance data presented for 2011 and after:
- Represents the performance of the model portfolio that client accounts are linked too.
- Reflect the deduction of management fees of 1% of assets per year.
- Reflect the reinvestment of capital gains and dividends.
The S&P 500, used for comparison purposes may have a significantly different volatility than the portfolios used for the presentation of SIM’s composite returns.
The publication of this performance data is in no way a solicitation or offer to sell securities or investment advisory services.
