Q4 2018

January 5, 2019

We just returned from a two-week “bucket list” trip to Tokyo and Bangkok where we were immersed in amazing landscapes, history and cuisine.  As much as I wished to surrender completely to the allure of Asian culture, I couldn’t avoid the distraction of the plunging stock market back home.  The more I followed the news, the more irritable I became.  At one point, I heard Trump claim that the “world” now respects America, and I had to laugh (choke, really).  As I see it, nothing could be further from the truth.

Throughout our overseas travels in recent years, it has been made abundantly clear to us that the world does not respect our leader.  Cab drivers, tour guides and locals have offered their unsolicited disbelief and bewilderment about what has happened to America and its citizens…for which we have no suitable explanation. Suffice it to say, the world’s perception of our country has changed dramatically these past two years… and not for the better.

In the 25 years that GCM has been in operation, I have been cautious about inserting personal politics into my relationships (and conversations) with clients. Given the current state of our nation, I now find myself at an impasse in that I can no longer avoid the intertwining of my personal views and professional values. My moral compass is front and center, as is my urgent need to take a stand.    I realize that doing so in this forum comes with some obvious risk, but it’s one I’m willing to take. At the moment, I’m feeling a kinship with Peter Finch’s character as a disgruntled TV news journalist in the film Network who delivers this famous call to action: “I’m as mad as hell, and I’m not going to take this anymore!”.  I share his sense of urgency and outrage and am compelled to expound here (perhaps with a side order of semi-restrained rant). Although my readership may be small, my message feels BIG. 

It is my belief that the year-end downward spiral in the stock market is mostly self-inflicted. Yes, the federal reserve is raising interest rates, but this was expected (only 7% of economists polled by the WSJ feel raising rates are a threat to the economy).  Trump’s tariffs, conflicts with allies and his unpredictable and irrational behavior are the major causes for the market upheaval.  It is not interest rates!  It is also my contention that Donald Trump serves himself/family rather than our nation’s best interests.

When this nation was founded, we declared our independence from Britain.  For me, independence means taking this concept to the voting booth.  I am a declared independent–not beholden to one party, one philosophy or, most importantly, one individual.  I strive to vote for the most suitable candidate regardless of party affiliation.  (For the record, republican governor of Ohio, John Kasich, had my vote for President in 2016.   It was most unfortunate that this intelligent, level-headed and experienced politician lost out to bluster in the primaries.)

I respect those who voted for Trump because they thought the system needed “a disrupter.” It did in some areas. I agree with Trump re: the need to disrupt the status quo in U.S.-China trade relations, for instance, and some choking regulations on business.  I do believe China is corrupt in many ways, and we should have been dealing with them more harshly for decades.  But too often Trump has given us disruption without any plan for what comes next. (Example: He has worked to destroy Obamacare with no plan for the morning after.) He announced a pullout from Syria and Afghanistan without guidance from the chairman of the Joint Chiefs of Staff, the State Department’s top expert or our allies.  People wanted disruption but, instead, Trump has given us destruction, distraction and debasement.

In fact, Trump’s biggest disruption has been to undermine the norms and values we associate with the U.S. presidency and U.S. leadership, overall. And now that Trump has freed himself of all restraints from within his White House staff, his cabinet and his party — so that “Trump can be Trump,” we are told — he is freer than ever to remake America in his image.  And what exactly is that image? According to The Washington Post’s latest tally, Trump has made 7,546 false or misleading claims through Dec. 20, the 700th day of his term in office. Personally, I DO NOT want America remade in his image. If allowed to happen, the results will be catastrophic to our national and personal finances.

The potential damage from an uncontrolled Trump goes well beyond our borders. America is the keystone of global stability. Our world still currently enjoys more peace and prosperity than at any other time in history largely because of America’s commitment to its ideals and principles.  We have always been a nation that stands up for the universal values of freedom and human rights, pays extra to stabilize the global system from which we were the biggest beneficiary and nurtures and protects alliances with like-minded nations.  I shudder to think of the fallout after Trump’s tenure, however long (or short).

But this is not just about the world, it’s about the decorum and stability we expect from our president.  If the CEO of any public company in America behaved like Trump has during the past two years, he/she would have been fired by the board of directors long ago. Should we change the rules by lowering our standards for our president (the highest office in the land)? Why does he get a pass? To be frank, GCM could not in good conscience retain a company run by Trump.  He does not fit the ESG (Environmental, Social, and Governance) philosophy that was discussed in my second quarter 2018 newsletter.

For the first two years of the Trump presidency, the markets treated his dishonesty and erratic behavior as background noise to all the soaring corporate profits and stocks. But that is no longer the case. Trump has markets worried. The instability generated by Trump— including his attacks on the chairman of the Federal Reserve — is causing investors to wonder where the economic and geopolitical management will come from as the economy slows down.  What if we’re plunged into an economic crisis by a president whose first instinct is to blame others?

And what about the recent tax law changes?  While this may benefit many of us, the new law is tragic for America.  We have helped only the wealthy and have gone into deeper national debt to do so.  Americans need to wake up!  This will be a nightmare for following generations.  (Shame on Paul Ryan for doing an “about face” on his life’s work and previous promises regarding budgetary policies.)

If America starts to behave as a selfish, shameless, con-man like Trump, we simply cannot imagine how unstable — how disruptive — world markets and geopolitics may become. We cannot afford to find out.  But know this: The last time America disengaged from the world in this manner was in the 1930s, and what followed was World War II. 

Indulge me for a moment in a fantasy scenario:  Oprah rents the largest stage she can find and entices all ex-White House staff members–including those imprisoned and those who are now private citizens– to sit in a semi-circle.  One by one, Oprah uses her superpowers to coax each one to reveal their truths about Donald Trump for all America to hear. (Okay, it’s far-fetched…but a guy can dream, right? And since I’m fantasizing, let’s widen the semi-circle by adding in the producers from The Apprentice!) 

Now, back to what matters most to you…GCM’s holdings:

I know that your knees must feel weak, but the debacle in the market and current prices of many of our holdings do not, I repeat, do not reflect the health of our companies.  I firmly believe we are at the entrance to a mine (albeit, long abandoned) that with patience and hard work will yield results that cannot be gauged from the surface today.

Many of our “gems” below the radar include: Enphase, Intellicheck, Widepoint, Daeske, Barfresh, Tower Jazz and Gladstone Land.  These companies are on solid footing.  Not one of their stock prices reflects its true value.  And that, folks, is the result of herd mentality – where selling begets selling and in which valuation does not factor.  The reality is that the cream does rise to the top.  In comparison, valuations will soon have their day and the robo-trading, (resulting in the random wholesaling of company shares) will be mitigated.

During these times of uncertainty, I am even more grateful for our work together to achieve our shared goals. Thank you for your continued trust in GCM and respect for my independent thoughts.  It remains my privilege to serve you by adding value to your lives.

– Len