After 32 years of practice and having the privilege of working for so many wonderful and incredible folks, as well as having the best staff I have been privileged to work with, you’d think I would be able to more clearly and persuasively explain how our firm has the good fortune and skill to produce well above average client returns. However, many times I feel that we have not clearly articulated the wisdom of our various positions in your portfolio, or even overall investment strategies that have led to long-term clients experiencing those above average returns. So, this letter is intended to provide you more clearly that understanding.

Predictive Management Style

First, Spectrum employs a predictive management style. What we mean by that is that we attempt (and have done so successfully) to place your funds in front of events we believe will occur prior to their occurrence. We have done this, on several occasions, by predicting market lows, generally to the day of the market low. By taking advantage of what I call market valuation “mistakes”, where the market’s emotions skewed what we believed were likely outcomes leading to large valuation miscalculations, we have created opportunities for future growth. We exploit irrational business media hype pertaining to financial events – not only in the individual securities we acquire but also in larger scale geopolitical events (like our correct projection on Brexit in 2016). Our predictive management style has created many significant upside opportunities for our clients and resulted in our well above average long-term returns.

Concentrated Asset Manager

Second, Spectrum Financial Alliance is a concentrated asset manager. This means we do not utilize widely ascribed-to philosophies of buying the entire market. A good example of this is that we do not own bond elements at this time. We have in the past; in fact, we have been concentrated in bonds in previous years when appropriate. However, we have eliminated bonds because of our belief that interest rates, both short and long term, must go up significantly over the next 20-30 years due to a variety of factors. These factors include things I have discussed in the past such as wage-push inflation, and, more importantly, past Quantitative Easing (QE) by the Federal Reserve, which tripled our nation’s money supply during the recession of 2007-2008.

Quantitative easing was a policy used to prevent a deeper recession, or a potential depression, in 2008. But, the consequences of QE go beyond cushioning that period of economic decline. These consequences will be felt for many decades to come in a rising interest rate environment (which we believe will see interest rates much higher over the next 10-15 years). As interest rates rise, bonds, and bond mutual funds, will largely decline in value. Knowing that the 30-year plus interest rate decline from 1986 to 2017 is now over and that we are naturally on the flipside of that (especially with the monetary oversupply created by quantitative easing) we have elected to eliminate bond elements from your portfolio. It is our belief that you should never hold portfolio elements that should be lower in value, in the long term, even if they help you a bit in the short term. I guess you could sum it up to say we like to invest in highly profitable, positive investment outcomes. We like investments that are not just buying the market, like an index fund, but actually add value to the portfolio by eliminating things that should, by most economic measures, hold back or reduce your overall portfolio value long-term.

Avoiding Packaged (Bundled) Products

Third, we do not pawn off our fiduciary responsibility to our clients by throwing money in “packaged”, heavily expense laden products built for the masses, like mutual funds. As an investor, it is my belief that one should always know what they are invested in and that I should only invest in things that have minimal downside and above average upside potential. You cannot do that in mass products like mutual funds where the managers cannot talk to their clients, cannot articulate clearly the whys and hows of their day-to-day portfolio management, and where fund owners cannot trade their funds until after the market closes, etc. Mutual funds also have high implicit costs, both from the operating expenses of the fund as well as, in most cases, other somewhat opaque or hidden charges like 12b-1 fees. Our rejection of mutual funds also applies to packaged products that tend to drain, due to high fees, your wallet and pocketbook. Those products would include variable annuities, non-publicly traded REITS, Limited Partnerships, etc… Those products are built to profit those that market them and sold on the false promise that they will be “safer”. In some cases, they even look safer because they may not be as volatile as the market, but in the long run, due to their high expenses and, in many cases, poor management, they will diminish your capital growth or even eliminate it. I have seen this literally thousands of times over the last three decades of my practice.

Recent Client Question

Earlier this week I had a valuable client who sent me an email asking me why anyone would buy a company (stock) that is being sued. This question pertained to Qualcomm, which we have owned since November of 2017. This is a great example of each of the three issues covered above. We bought Qualcomm due to their great product, skilled management, and because the company is in the technology sector (where we were somewhat underweighted in our portfolio). Qualcomm was clearly undervalued by the market. But, we also bought them because they were involved in a suit with a monolithic giant company called Apple. Apple was suing because they did not like what Qualcomm was charging them for mobile phone chip technology. Then, on April 16th, Apple settled with Qualcomm, resulting in the stock rallying 22.61% in one day, adding tremendous capital to our investors’ wallets. We expected that result and believed it was a David v Goliath situation where Apple’s legal claims would not hold up in court. Even if the claims held up, we believed there was significant downside protection because Qualcomm controls the next big thing in computer and chip artificial intelligence technology, which is 5G cellular network technology. The client who posed this question had seen Qualcomm climb from $57.46 to $79.89 per share over three days (April 16 to April 18). On May 22nd, we purchased more of the stock to take advantage of what we believe is a short-term correction due to a lower court adverse ruling that we believe is very likely to be overturned by an appeals court soon.

Increasing our Qualcomm position occurred because of all three of the reasons mentioned above. First, we are a predictive style. We are predicting that the issues raised by two lower court federal judges (who have heavily contributed to the financial efforts of companies in Silicon Valley, like Apple), would not be upheld on the appeal. Second, we are a concentrated manager. We wanted to increase our Qualcomm exposure after a short-term correction and what we believe is a market valuation mistake. Third, Qualcomm is not an opaque, “bundled” product. It is a corporation with a well-known product, management team, and a bright path to the future.


Our firm’s investment methods and strategies can be clearly defined, and differentiated from other service providers, by encapsulating what we do in one statement. Spectrum Financial Alliance utilizes a predictive management style, a concentrated allocation approach, and avoids packaged products that reduce returns by increasing client fees and provides no real management. The knowledge, experience, and wisdom of our professionals is proven by our third-party assessed performance by Morningstar Inc. Achieving our performance numbers, and constantly improving in both that regard and the service to our clients in total wealth management and financial planning, is our singular goal.

We believe that our economy has embarked on an extremely long, and powerful, period of growth. Literally today we saw another earthshaking event that illustrates the geopolitical and financial changes that are occurring worldwide because of our nation’s shift in presidential administration policies – that event being the resignation of British Prime Minister Teresa May. May worked long and hard to overcome a decision we predicted prior to it occurring – the exit of Britain from the European Union, or Brexit. This ultimately led to her political demise as the British people, like the vast majority of Americans, want logical and reasonable immigration controls and do not want the European Union’s Supreme Court overruling the sovereignty of the U.K.’s Supreme Court. This worldwide movement towards holding tyrants accountable, eliminating unfair trade practices that literally destroyed income growth for 20 years in our nation’s middle class, and removing impediments from good business practices in our own domestic economy, has led us to this moment in time. This will not be stopped. It can be slowed by political interference like we see daily in Washington D.C. but this is clearly an American citizen led event that has long legs and powerful consequences, not only for our economic growth, but for real income gains of average Americans, and further excellent gains in the value of your investments. Our methodology eliminates the emotion that seems to sway the market from day to day and week to week by focusing on predictable, long-term events that should drive the valuations of your portfolio elements.

Your well-being is our sole focus at Spectrum Financial Alliance, and we appreciate the opportunity to serve you and your family. Happy Memorial Day, God Bless, and God Bless the United States of America!