Carl Stuart is an Independent Registered Investment Advisor. He manages approximately $340 million, primarily on a fee basis, and has been in the business for 32 years.
Carl has been married to his wife, Claire, for 41 years and has three children, ages 37, 34, and 31.
In 2002, he was honored by Registered Representative, a national magazine, as one of the top 10 advisors in the United States.
For the last five years, Carl was honored by Registered Representative magazine as one of the top100 independent advisors in the country.
In 2008, Carl was listed in Fortune Magazine as one of the top 50 independent advisors in America.
In 2009, 2010, and 2011, Carl was listed in Barron’s magazine as one of the top 1,000 advisers in the nation.
Carl is Chairman of the Board of the Texas Presbyterian Foundation in Dallas, Board Member and Chair of People’s Community Clinic, former Trustee and Chairman of the Investment and Finance Committee of Pine Manor College in Boston, Massachusetts, past Chair of the YMCA of Austin, past President of Big Brothers/Big Sisters of Austin and past President of Westwood Country Club
Here are selected return numbers for the first ten months of 2013.
(As of 10/31/13)*
Dow Jones Industrials +18.60%
S&P 500 Index +23.20%
NASDAQ Composite +29.80%
Dow Jones World Index (ex. U.S.) +12.30%
(As of 10/31/13)*
Russell 2000 +30.90%
Russell Value Index +25.75%
Russell Growth Index +26.22%
Major Bond Indexes (As of 10/31/13)*
U. S. Treasury – Intermediate - 1.10%
Barclays Cap. Aggregate Bond Composite Index - 3.33%
Mutual Funds (As of 10/31/13)*
Lipper Large-Cap Growth Index +27.39%
Lipper Large-Cap Value Index +26.25%
Lipper Small-Cap Growth Index +33.40%
(Source: The Wall Street Journal, Russell Investments & Barclays websites)
*Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot
invest directly in any index, and index performance does not include transaction costs or other fees,
which will affect actual investment performance. Individual investor’s results will vary. Past
performance does not guarantee future results.
FINANCIAL AND INVESTMENT PLANNING
October was a very good month for equities. The S&P 500 Index rose 4.5%, while the NASDAQ and the Dow Industrials posted gains of 3.9% and 2.8% respectively.
In mid-November I traveled to Baltimore to attend an investment conference sponsored by a large asset management firm founded in 1937. The portfolio manager’s (PM’s) oversee portfolios invested globally in stocks and bonds. I always enjoy conferences like these. I find the longer PM’s have been managing money, the more humble they have become. As you might expect, the equity managers have had a very good 2013. I think it is very interesting that the one theme I heard expressed by virtually all these professionals was caution. They believed their portfolios had performed well. They also believed their companies had reached high valuations. They based their views on historical comparisons of value. While they are far too wise to suggest the bull market which began in March 2009 is over, I could tell they were somewhat doubtful recent returns could continue to be replicated.
This collective caution resonates with me. During my 35 year career I have learned that reversion to the mean is real. However, I have also learned bull as well as bear markets for stocks can last longer than I would expect, or in the case of bear markets, longer than I would like. Early in my career I witnessed the multi-year energy bull market. In the late 1990’s I experienced the technology and telecom bull market. During the current upswing small cap stocks have been particularly good performers. During the Baltimore conference one speaker indicated their fifty year old flagship small cap growth portfolio was at valuation levels reached only five times in its history. During my September trip to New York I visited with a small cap value manager in whom I have great confidence. He confided he believed his portfolio values were also stretched.
I tell you these things to keep you informed and not to suggest any specific action. Since market moves can attain momentum and sustain for long periods, I believe we accomplish prudent portfolio management through asset allocation. When we own non-correlating assets like bonds and managed futures and merger arbitrage, we are essentially admitting our inability to foresee the future. What we can reasonably expect is that at some point in the future the bull market will end. How will we be prepared when that happens? Based upon history as well as my personal experience, non-correlating assets may better position portfolios during the next bear market.
Nevertheless, we cannot obtain inflation beating returns without owning risk assets. Consequently, we can mitigate risk, but we cannot eliminate risk. As our friend Al Gore would say, this is the inconvenient truth.
The final speaker at the Baltimore conference was Charlie Cook of the Cook Political report. If you watch election television coverage, you may well be aware of him. I would characterize his remarks as non-partisan. Here are a few of his more memorable points.
According to polling, Americans hate Democrats and despise Republicans. The House of Representatives has the lowest approval rating in the history of the Gallup Poll. The second year of the second presidential term is frequently a low point in public approval. President Obama’s approval is similar to President George W. Bush’s in his sixth year, although Cook pointed out Mr. Bush had an increasingly unpopular war in Iraq and
Hurricane Katrina to contend with. Cook does not see changes in control of either chamber as a result of the upcoming congressional election. However, he believes there is a slim chance the Republicans could take the Senate.
Consequently, Charlie Cook sees the next three years as being pretty much what we have been experiencing. Given the approval ratings, I would think this is not welcome news for Americans.
There is one last theme from the conference that I believe you will find interesting: The re-industrialization of America. The portfolio managers cited three factors that they believe will contribute to increasing domestic industrialization. First is cheap natural gas. You may recall in last month’s letter I showed you natural gas prices around the world. U.S. prices were very low when compared to countries and regions like China, Japan and Europe. Second, increasing productivity. One speaker cited his recent visit to the Tesla Motors automobile manufacturing plant in northern California. Tesla purchased this facility which had been closed for years, and at one time produced one million cars annually. He commented about how few people were working in the factory. Robots/machines were doing much of the work. Third, U.S. labor costs have become more competitive. Labor costs have been rising substantially during the last few years in China. As we know with our recession and high unemployment, labor costs have not risen here. Mexico is also looking more globally competive.
No one suggested we are going to return to the pre-recession 2000 level of 17 million manufacturing jobs. Furthermore, the various speakers believe this will be a slow moving phenomenon.
Well, there you have it. I hope you found these insights and opinions as interesting as I did.
Carl W. Stuart
- Past performance is not indicative of future results.
- The S&P 500 is an unmanaged index of 500 widely held stocks that’s generally considered representative
of the U.S. stock market.
- The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.
- The Dow Jones Industrials is an index of 30 stocks that is considered representative of the overall market.
- The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks.
- Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.
- Asset allocation does not ensure a profit or guarantee against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
- The information contained in this report does not purport to be a complete description of the securities, markets, or
developments referred to in this material, is not a complete summary or statement of all available data necessary for making an investment decision, and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Carl W. Stuart and not necessarily those of RJFS or Raymond James.