Tradewinds Navigating Life & Finances
JULY 6 2021 / VOL 14, NO 2
Regatta Capital
Group is hiring!
See What’s Inside Sustainable Farmland Investing
2021 Benchmark Returns: 6/30/2021
The Wild Real Estate Ride
MSCI All Country World Index: 12.30%
How Regatta Creates Raving Fans
Morningstar Moderate Target Risk Index: 7.26%
Working on Your Fitness
S&P 500 Index: 15.25%
US Aggregate Bond Index: -1.60%
N E W S L E T T E R / J U LY 2 0 21
The Summer to Treat Yourself !
By Kristin Grant, Financial Advisor Associate & Director of Financial Education
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his past year was perhaps the most anxiety inducing of all due to the COVID-19 pandemic. Everything that we knew about our daily life schedules shifted. Schools and offices went remote, outdoor dining transitioned to being delivered directly to your home and zoom calls were the new face of social gatherings. We had to learn how to curb that anxiety by making the best use of our time and money. For some of us that may have meant building our savings or putting some money to work in new investments. For others that may have meant starting a new career or even a new business to meet new demands. And a few of us may have seen this as an opportunity to retire. Whatever the case, we adapted to our circumstances. Now, we are well into the new year and ready to put this pandemic behind us. 47% of the nation is fully vaccinated and restrictions have lifted in various states. Restaurants have reopened, travelling has reconvened and we can finally make up for all the summer weddings, birthday celebrations and outdoor concerts that we missed out on last year. Personally I am looking forward to planning another vacation again as I love to explore different cultures and partake in some water activities.
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As we prepare to indulge in some summer fun, I want to provide some tips for a financially savvy summer: Have a separate bank account designated for short term plans such as travel, concerts and other extracurriculars. If we learned anything from the past 14 months, it was the importance of having an emergency fund. This separate account should not take place of your emergency fund but serve as a tool to assist you with planning within your means. Create a list of activites you would like to do and research the cost for that activity. Stay Flexible. With whatever you intend to do this summer, be open minded that outdoor activities will be in high demand. This is the first summer where there is a shortage of car rentals, campsites and hotel accomodations. But dont let that discourage you. Advanced planning is key! If you are looking to travel, let the best deals lead you to your next travel destination. There are plenty of sites available to assist with making reservations such as the Hopper for convenient flights. Even though we are still at the rear-ending of the pandemic most international travel still remains off
limits, but domestic travel is booming in demand. If you intend to do some extensive travelling, ensure your estate planning documents are in good order and dont forget your insurance coverage. Unfortunately, incidents happen so let’s be proactive and control what we can. A proactive approach is almost always the best approach. Last and certainly not least, summer is the time to gather outdoors with the ones closest to you and foster new memories. We all take pride in being hard workers but life is all about balance. True financial health is being as able to do that which you desire while being mindful of your spending habits. We hope you have a great summer!
www.regattainvest.com
S T O C K M A R K E T U P D AT E
Executive Summary
By Russell Mohberg, Co-Founder & Chief Investment Officer
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t has been a very strong first half of the year for U.S. stocks. The Dow was up +13.79%, S&P 500 +15.25% and NASDAQ +12.92%; all are near highs. Meanwhile, short-term interest rates remain at 0% and the 10-year treasury yield retreated again to 1.43%. Investors were expecting a boom from reopening after COVID but the advance in stocks has exceeded expectations. The growth in the economy, manufacturing and jobs contributed to the boom, but the single largest factor was the Federal Reserve keeping long-term interest rates lower than expected. The Fed doesn’t have an interest rate dial in its office, it prints money and then uses those dollars to buy treasury bonds. They have been buying at a rate of $80 billion per month. This forces the prices of treasuries up and the yields down. Investors generally thought the Fed would let interest rates rise by now and that would produce a correction in the stock market. Instead, the Fed is letting the economy run hotter until it sees fuller employment. We expect that this drama between investors and the Fed will continue over the next couple years until interest rates reach a
more normal level. Barring another blow to the economy, rates will go higher – if only because the Fed cannot infinitely buy Treasury bonds to contain rates.
stock portfolios we recently added some dividend payers such as AT&T (after the merger announcement sell-off) and dividend growers like Becton Dickinson. The top performers in our stock portfolios at the mid-year point are Alphabet +42%, Capital One +60% and Williams–Sonoma +63%. The laggards have been Novartis -0.40%, Unilever -0.65% and Walt Disney -2.25%.
In this type of market, we like companies that are either dominate growers or undervalued and recovering well. In real estate, lower interest rates make more apartment deals feasible, but it is quite challenging to get a good deal with so many buyers in the market. We continue to invest in a few opportunity zones deals each year and the next one coming up is in Raleigh, North Carolina. Other areas that are attractive are renewable energy for income and municipal bonds. As the economy recovers, energy prices have increased dramatically making renewables even more attractive. Muni bond values have been rising as we see more debt and government spending producing higher tax rates. In our
Turning to the fund results, the Parnassus Endeavor Fund from our SRI portfolio series was the standout at +26.21%. There was also a strong showing by our most widely held fund, the VanEck Vectors Morningstar Wide Moat ETF returning +19.45%. Our managed portfolios had four funds that were slightly negative, these were all core bond funds and ETFs. The Regatta “house view” is that the easy money has been made with the COVID recovery. Now we have entered the phase where stock managers will need to be hyper selective and income investors will need to take more risk to beat inflation. The sun is shining and the breeze is blowing but hang on to your hats as we expect some challenging weather on the horizon.
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N E W S L E T T E R / J U LY 2 0 21
Mr. Toad’s Wild Real Estate Ride By Brian Mollo, Real Estate Consultant
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e have surpassed a full year since the initial COVID closures were put in place, and what a tear the residential real estate market has been on. The low inventory of houses has fueled bidding wars with homes selling at whirlwind prices. In the hottest markets, multiple bids over asking, cash-only offers, and no contingencies have become the norm. Low mortgage rates, improving economic activity, and pent-up demand should continue to provide strong tailwinds. With U.S. central bank officials moving their first projected rate increases from 2024 to 2023, historically low mortgage rates are still expected to continue for some time. While the home mortgage rates do not follow the Federal Funds Rate, they do generally track the yield on the 10-year Treasury and are affected greatly by the amount of mortgage-backed bonds the Fed purchases. As rate increases begin to happen, they will be extremely impactful on buying power and will have a long-term cooling effect on demand. On the supply side, residential permit filings continue to set the pace for the construction industry. But a lack of an available labor pool is going to present challenges to timely delivery of product. This is on top of rising material costs and trade line disruptions. All of this leads to a supply boost that will ultimately fail to keep pace with the near-term demand.
will also look to keep us on our toes. Experts concede a crash like 2008 isn’t expected, but opinions differ on how long this run can actually keep pace. One thing that everyone can agree on is that if home prices continue to move higher making ownership less affordable, more and more people will be forced to rent.
As we move toward the end of the year, however, we’ll have to keep a close eye on how things shape up because the government stimulus programs will have ended by then and concerns of higher inflation could be at the forefront. The looming end to the foreclosure and forbearance programs
Real estate, among many things lately, has been on a wild ride. But buckle up as we head toward the end of 2021 because as the saying goes…there are no crystal balls in real estate!
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On the commercial front, cap rates are facing significant downward pressure, from apartments to self-storage facilities to hotels and industrial properties. And speaking of more folks renting by necessity, rental housing and apartments have remained resilient through the pandemic. The forward-looking outlook for the apartment industry continues to remain positive. But what will the new normal be for tenants and owners as we move forward? Will renters return to cities and what will become of the work from home environment? However these new realities play out, it’s apparent that the most challenging times for apartment owners are in the rearview mirror. Moratoriums at both the federal and state levels are coming to an end, including significant ones pertaining to evictions. With the ability to more effectively run the business and with the home prices continuing their upward trend in the short term, an environment of accelerated rent growth will take place.
FIRM UPD ATE Regatta Capital Group is looking for motivated, dynamic individuals to join our team! If you know someone who would interested in a career in wealth management, we would love to hear from them! To learn more about the positions available, please contact us at (310) 725-9102.
www.regattainvest.com
Introducing Sustainable Farmland Investing By Lee Clay, CSRIC Financial Advisor, ESG & Impact Investing Specialist
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ummer’s upon us once again and nothing says summer like fresh tomatoes, blueberries, blackberries, and corn. But not all veggies and fruits are equal. The debate over GMO crops vs. organic crops rages on. Monocrop agriculture practices coupled with the excessive pesticide use, synthetic fertilizers, and abusive tilling practices have left American soils depleted of nutrients and moisture and subject to extreme erosion, all of which contribute to the growing climate crisis as one of our greatest carbon sinks is depleted. At Regatta IMPACT, we’ve been looking for a way to invest in sustainable and responsible agriculture and recently partnered with Farmland LP, the largest organic farmland fund manager in the US, to bring this uncorrelated asset class to clients. Farmland LP is currently on their second fund which works to acquire conventionally farmed land and convert it to organic farmland over a 3-year period. The conversion to organic farmland adds intrinsic value to the land as organic acreage can be sold at a higher price than non-organic land. Farmland LP employs century old farming techniques to add nutrients back into the soil by naturally rotating crops, going from grain to pasture to vegetables and back to grain in a cycle that rebuilds soil composition and improves moisture retention. They invest
in state of the art infrastructure such as satellite monitoring of plant vigor, low till planting and harvesting, and the conversion from flood to drip irrigation to conserve natural resources. The last step in the process is leasing the land out to local farmers who grow high profit margin USDA organic crops such as blueberries, strawberries, and grapes that are then sold to distributors such as Driscoll’s where they make their way to the shelves of your local grocer. Farmland LP’s first fund which launched in 2009 has avoided and removed 17,000 metric tons of carbon - the equivalent of 41mm miles driven by passenger cars, 18.5mm lbs of coal burned, and 1.9mm gallons of gasoline consumed. The positive impact of this fund also resulted in 1.5mm lbs of carbon stored in the soil while avoiding 207k lbs of pesticides and 6.8mm lbs of synthetic nitrogen. From an investment standpoint, it also returned approximately 10% per year for investors. We’re very excited to be able to bring Farmland LP to clients. It has a terrific story, a strong, uncorrelated return profile, and tremendous impact in the form of fostering healthy lifestyles and supporting sustainable practices that are a benefit for both people and the planet. We look forward to working with Farmland LP on Fund II and far into the future.
The Regatta Financial Weather Report Key Economic and Market Indicators
Economic Growth Forecasts 2021
U.S. Retail Sales Growth, 1 year
28.1%
Expected to be 14% by Sep 21
U.S. Unemployment Rate
5.8%
Lowest since March 2020
Inflation (CPI)
5%
Highest rate since Aug 2008
Manufacturing Economic Health (PMI)
62.1
All-Time High
S&P 500 Valuation (Forward P/E Ratio)
21.70
Gradual decline since Sep19
Source: TradingEconomics.com, ycharts.com)
Interest Rates 30-year mortgage, fixed
3.15%
slight increase from Q1 2021
Money Market
0.08%
Steady decline towards 0
Five-year CD
0.45%
Steady decline
Prime rate
3.25%
Down 1.75% from a year ago
US
6.4%
Euro ex UK
4.4%
UK
5.3%
Japan
3.3%
EM
6.7%
China
1.2%
India
12.5%
World
6.0%
Source: OECD
Source: wsj.com/market-data/bonds
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N E W S L E T T E R / J U LY 2 0 21
Home Gym v. Local Gym
By Cole Thompson, Financial Advisor Associate & Director For decades the fitness industry has shaped us as enthusiasts and creatures of habit – it has given us a sense of community and belonging that is so valuable to one’s mental and physical health. So why do we hear that the local gym is a thing of the past and that the home workout system is the new normal? Well, I am here to remind you that humans, especially Americans, thrive off structure and routine – even if it means getting in your car and driving 5 miles down the highway to get in a quick sweat.
value low price (“HVLP”) franchise space, I see new member sales outperforming pre-COVID times as Americans plant the traditional fitness routine back into their daily lives. “Consumer trepidation around using in-person fitness facilities will likely push a full recovery out to 2023 or 2024,” said Alex Evans, co-author of the report and managing director at L.E.K., a global management consulting firm.“ And even once gym use reaches pre-COVID-19 levels, it will be based on a different mix of in-person and digital, at-home activity.”
Now that the mask mandate and capacity limitations have been lifted, gyms have welcomed their members back with open arms and cleaner facilities (minus the few skeptics who retrofitted their entire garage to now a fully functional gym). As an investor in Crunch Fitness, a leader in the high
At-home activities and gym memberships are not mutually exclusive – there will be a continuous push to double dip in both. This way people can continue to live healthy, flexible lives as they choose to work out at home or in their local group fitness class. To summarize – the fitness
industry has morphed, transformed, and adapted for decades and it will continue to improve to meet consumer needs. Variety is key and having a routine promotes consistency and strong mental awareness. Everyone is unique. Not everyone requires a fully scheduled day to reap the health benefits of a routine, so make the choices that work for you, knowing they’ll only make you healthier and more efficient with your time.
Client Service - The Regatta Way By Grant Nabell, Client Service Associate As a new employee of Regatta Capital Group and a Client Service Associate, I have learned in the past four months that client service is one of, if not the most, important aspects of our core values at Regatta Capital Group. Without our clients, where or who would we be? My background is in sales and customer service and in my former job I was able to see the importance of client service. As a salesperson, I obviously wanted to sell and pitch everything I thought the client would like or needed, but I wanted the client to view me as more than a salesperson. I wanted the client to know I cared about them on a more personal level. At Regatta, we take on a similar outlook. We sit with the client, we listen thoroughly, we consult, and after that, we tailor a plan to fit your exact needs and goals. We want the client to know that we care about them and view them as family and not just another number or a name on a computer
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screen. At Regatta Capital Group we want to create life-long relationships with our clients through exceptional service.
A book I read recently had a quote that really registered with me regarding Client Service:
One of the many things that sets us apart at Regatta versus the other financial firms is our incredible access to each associate and advisor. Whether it is a phone call, email or an in-person visit, we always want to be accessible, and we always want to hear from the client. We like to view each client as a part of our Regatta Family, and we want them to feel the same about us.
“Create a vision of perfection centered on the customer.” – Raving Fans.
At Regatta Capital Group our goal for each client is to create a raving fan. This means going above and beyond each and every day to ensure they are taken care of and doing well in more ways than just financially. Every time you contact Regatta, we want you to know and feel how much you, the client, is valued. With our team and all of our unique backgrounds, we know we are able and willing to give you the best service available.
At Regatta Capital Group we want you to be well invested and your accounts to perform well, but we also want to make sure that we are well invested in you. At the end of the day, you, the client, is our single most important asset, and we want you to feel that importance day in and day out. In conclusion, I would like to offer a small call to action. If you are a client and reading this, I would like to welcome any feedback, ways we can improve, or hear any ways we can better service you. Please feel free to email me anytime at: grant@regattainvest.com. I look forward to hearing from you.
www.regattainvest.com
Finance-ology MEME STOCK - A meme stock is a stock that experiences vast peaks in returns over a short
perior of time due to word of mouth speculation from investors who have a heavy influence on social media platforms. The term originated this year from an online discussion form called Reddit where “Wall Street bets” on undervalued companies had become widely popular amongst investors. One of the most popular meme stocks is GameStop. At the start of 2021, Gamestop was trading at $19 per share. By the end of January, the stock reached an all-time high of $483. Several weeks later the stock plummetted to about $40 and has been peaking and plummeting ever since. These type of stocks experience the most volatility due to new investors chasing the potential hike in returns and/ or current investors taking profit or panic selling.
Front Row: Nick Ozer, CFP®, Lisa Margulies, Grace Yu, CFA, Lee Clay, CSRIC; Back Row: Spencer Kelly, CFP®, Ellen Himmel, JD, Russell Mohberg, CFP®, Kristin Grant, Britt Joyce, CFA, Marc Joyce, JD, Erika Dumandan, CPA; Not Pictured: Lindsey Diranian, Ben Satterfield, Cole Thompson, Grant Nabell
If you have comments or questions, please do not hesitate to reach out to us at info@regattainvest.com
Main Branch Office
Westchester Branch Office
Brentwood Branch Office
Spencer Kelly, Nick Ozer,
Lisa Margulies
Ellen Himmel
Britt Joyce, Lee Clay, Ben
7135 W. Manchester Avenue, Ste 2
12011 San Vicente Blvd. Ste 320
Satterfield & Russell Mohberg
Westchester, CA 90045
Los Angeles, CA 90049
880 Apollo Street, Ste 129
Office: (424) 255-1045
Office: (310) 471-6461
El Segundo, CA 90245 Office: (310) 725-9102 7
Regatta Newsletter Volume 14, Number 2 Editors: Kristin Grant Russell Mohberg, CFP®
880 APOLLO STREET, STE 129 EL SEGUNDO, CA 90245
Contributing Editor: Spencer Kelly, CFP® Contributors: Venessa Robinson Grace Yu, CFA, FRM Britt Joyce, CFA, CFP® Lisa Margulies Erika Jenkins, CPA Ellen Himmel, JD Nick Ozer, CFP® Lee Clay, CSRIC Marc Joyce, Esq. Brian Mollo Cole Thompson Grant Nabell Benchmark Data Source: Tamarac, Inc
Your personal performance report has been posted to: https://regatta.portal.tamaracinc.com
ABOUT US
We are unabashed in our commitment to scouring the investment universe to find the best possible solutions for our clients and their money. We know there’s an easier way to manage money, but we choose to take the road less traveled.
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Regatta Capital Group
egatta Capital Group provides investment management and financial planning advice to individuals, families, business owners and endowments. The firm manages more than $750 million for clients in Los Angeles and more than 25 states.
For example, we invested in Facebook pre-
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IPO, own clean energy facilities and have directly invested in over 50 private, multi-family apartment building LLCs.
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2021 Regatta Capital Group, LLC. All rights reserved. Reproduction by any means is prohibited. While data contained in this report are gathered from reliable sources, accuracy and completeness cannot be guaranteed. All data, information and
opinions are subject to change without notice. Investments referenced are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. Past performance does not predict future results.