May 26th, 2020
Chadd Mason, CEO The Cabana Group
What Investors Can learn from Today’s Market
Equity markets worldwide continue to climb in the face of dire economics. In two decades of investing I have never seen a starker example of investors immediately setting the bar for a worst-case scenario and then just as quickly repricing as if anything but the catastrophic appear inevitable. The last three months (and perhaps the next three) will be studied in business schools for many years to come. As gut wrenching as it has been for those of us who invest for a living, it has been equally beautiful. There are so many valuable lessons to be learned from this. It is a once in a lifetime opportunity to stand back and watch the collective behavior of the single greatest intellectual organism on earth during the most violent and sudden of economic crises. While there have been equal or worse situations thrust upon our societies, they did not occur in the age of instantaneous transfer of information. It has been truly remarkable, and the ride is still not over.
I have mentioned many times the necessity of having a repeatable investment process. It is not required that it be any one process, but in my opinion, all successful investors have a process. The more robust the process, the greater the potential for success. This is mainly true because you will stick to it through thick and thin. The sticking to it is 90% of the trick to investing. The remaining 10% is coming up with a process that you can rely on when things get scary and you want to back down because you think you know better. It is this 10% that makes an advisor or money manager worth his or her salt. I can tell you personally that every instinct in my body has said the current market is crazy and prices should not rebound like they have, but the process says otherwise, and we follow it. It doesn’t mean we will be right or wrong at any given time, but it does mean that we have that 10% that is strong enough to overcome emotion and we can act objectively when it gets tough – really tough. I have likened investing to flying an airplane. It is simple about 90% percent of the time. Almost anyone with a little time in the seat can do it, but when that remaining 10% rolls around you better know what you’re doing.
At Cabana, we are still in our Moderately Bearish Scene after reallocating earlier in the month to add risk assets to the portfolios. We are prepared to reallocate again in either direction as conditions warrant.
This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.
Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.
The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visit www.fa-mag.com for more information regarding the ranking.
The Financial Advisor Magazine 2019 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor Magazine. Working with a highly-rated advisor also does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be viewed as an endorsement of the advisor by any client and do not represent any specific client’s evaluation. RIAs were based on number of clients in 2018, percentage growth in total percentage assets under management from year end 2017 to 2018, and growth in percentage growth in assets per client during the same time period. Visit www.fa-mag.com for more information regarding the ranking.
No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.
Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to email@example.com.