24 Apr

The phrase "Where there's smoke..." typically ends with "...there's fire". Today, we are not convinced this is the case. Certainly there is smoke in the political sphere, both in the US and abroad. We also see smoke billowing out of the conflict between internet-based retail versus traditional 'brick and mortar' establishments. On the positive side, the smoke, or perhaps steam, continues to build in the US economy. This strength is prevalent in most economic data.

It is critical to keep these observations in perspective. In spite of the day's pressing geopolitical issues, we enjoy the highest standard of living supported by the greatest level of wealth that has ever existed. Contrary to the 24 hour news cycle, society is doing more than a few things right. It is this view that underpins our optimism for the future. For further evidence of faith in capitalism, look no further than Omaha, Nebraska in a couple of weeks.

27 Feb

In recent missives, we have shared our thoughts on the challenges of investing and the common pitfalls spelled out by behavioral finance. In this post, we focus on the "why" we invest.

Investing is the deployment of assets toward achieving something of greater value. We focus on the investment of financial capital, but often, investment comes in the form of time, energy and relationships - call it human capital.

We invest because we know we must. Failure to do so, is a near guarantee for the erosion of purchasing power. We invest to protect against an unpredictable future, and we invest for the betterment of humankind by providing funding to organizations that consciously make an effort to preserve our rights, resources and environment.

31 Jan

Many profess that truth is stranger than fiction and today it seems applicable to many aspects of society. From politics and finance to the tabloids, the stories of the day are more sensational and farfetched than ever. And in truth, we are learning that many of these stories are either completely false or unverifiable. These communiqués are working their way into the consciousness of society through social and in some cases, mainstream media. Often these fictitious stories are debunked, but only after the damage has been done.

Ask someone charged with a crime, who had their charges dropped after better information became available, if their reputation was tarnished.

Herd mentality weighs heavily when individuals make decisions about their money. Behavioral finance is a field that has developed around this phenomenon and its tenets extend well beyond money. It can be applied to explain the poor decisions individuals make in many aspects of life in an attempt to preserve their own well-being.

The root causes for poor decisions are the lack of perfect information and abundance of personal biases. Predicting future events based on facts should be easier today since enormous amounts of data are now available. However, data must be analyzed for relevance and context. It seems the outcome of professional sporting events should be near to a sure thing with the statistics that are easily known about athletes and teams, and yet, every week there are upsets. Life, like investing, is not as predictable as we might like.
Over time though, statistics win out. And when investing in well-financed, diligently run businesses at reasonable prices, desired results are attainable. The key is paying an attractive price. 

23 Nov

Make no mistake, we enjoy what we do and embrace the challenge every day. But, in truth, investing is hard.

The difficulties are numerous and range from determining the quality of specific data at a granular level to analyzing the possibility of large, unforeseen events (such as geopolitical conflicts and domestic elections). Furthermore, results are often measured over extremely short time frames. And depending on one's objectives, monthly, quarterly or even annual performance evaluations may be short-sighted. Rather, the focus should be on meeting the specific aims important to the owners of the portfolio.

28 Oct

Technological advancements have given us greater capabilities in just about every human endeavor. Today we enjoy unprecedented levels of productivity and, consequently, society as a whole has never been healthier or wealthier. However, these benefits are not shared by all equally. This has been true in the past and will be true in the future. Those who do not prosper as trends shift will feel a sense of discontent that manifests in the protest of the day.

Three months ago financial markets were rocked by the unexpected results of the UK referendum on leaving the European Union, the same union that the Brits strongly supported forming a generation ago. An examination of history draws parallels to many events where a population expresses dissatisfaction with the status quo and moves in an opposite direction in an attempt to better the situation. Unfortunately, other issues, sometimes unexpected, often arise when attempting to fix the original problem. 

14 Sep

IoT is everywhere. The ability to connect "things" to computers produces enormous amounts of data at a speed and scale that is difficult to fathom. All of this information cascades into the realm of artificial intelligence (AI) and predictive analytics where data can turn into informed decisions.

This next-step in the internet story will lead to real-life innovations and efficiencies gained in healthcare, energy production and distribution, business and consumer consumption behavior, agriculture, travel, entertainment and the list goes on. "Wearables" such as the FitBit watch, iWatch by Apple or Google Glass glasses are good examples of the most obvious IoT available now, but this is just the tip of the iceberg. What does the future look like? The following is from the Chinese smartphone maker Huawei:

"Power companies read meters through tele-metering systems instead of visiting houses; doctors remotely monitor the conditions of their patients 24/7 by having the patients use devices at home instead of requiring the patients to stay at hospital; vehicle-mounted terminals automatically display the nearest parking space; sensors in smart homes turn off utilities, close windows, monitor security, and report to homeowners in real time. These are scenarios that only existed in science fiction previously. With the coming of age of the Internet of Things, however, they are becoming a reality."

22 Aug

Last month EPIQ Partners, with the help of ThinkPink Idea Consulting, conducted confidential research of those who know us best... our clients! The objective of the project was to identify the current perceptions of our firm and to better understand our areas of success, opportunities for improvement, our differentiators as well as to assist us visualize the future.

We are quickly approaching our four-year anniversary and felt that it was time to better understand what got us to this point. In late 2012, we set out to form a boutique investment office for successful families and their related interests. When looking at our roster of client "partners", we could not be more pleased with the quality of relationships in place. We are fortunate to work with a variety of investors about whom we care deeply and share an alignment of interests with.

Candidly, it is a bit frightening to ask for feedback from those that are most important because one is never sure what you will hear and less certain if you are going to like it. The good news is that the overwhelming response was positive (see the word-cloud above taken directly from the research). EPIQ is "working" and we should "stay the course" according to the vast majority of responses. However, it was interesting to learn the perceptions that exist and exciting to ponder the actions to take as we strive for constant improvement.

29 Jul

This quarter we revisit a theme on which we opined in early 2015 titled "The Tale of Two Markets." Fast-forward 18 months and the situation has only magnified with bond yields continuing to fall, suggesting an anemic economic outlook, and stock market valuations priced in anticipation of continued earnings growth. What's the problem? Both schools of thought cannot be right at the same time.

The exhibit above graphs the yield of the overnight Federal Funds (FF) rate, the interest rate banks charge one another for short-term funding. We use this as a proxy for the risk-free rate off of which investment returns can be measured for assuming additional risk, such as credit, liquidity or term.

03 May

Spring has arrived and the change in season is welcome by many, both literally and metaphorically. Warmer and longer days do wonders for the psyche and the transition seems to also have a positive effect on financial markets. The past 18 months have been challenging for most investors. The broad-based, US-equity averages are essentially flat and bonds, with few exceptions, have had it no better. It seems that only investments with small-return prospects, such as municipal bonds, delivered on expectations.

During the first six weeks of 2016, markets fell precipitously due to global concerns over economic growth prospects and a myriad of other issues including, general discontentment with candidates from both parties for the US Presidency along with other growth concerns facing Europe and China. When momentum takes hold, which we believe it did, market prices move too far causing dislocations. The selloff in risk assets that began to accelerate during the 3rd quarter of 2015, continued right through yearend. However, fundamentals do matter and even though macro-economic conditions have not changed significantly, markets rebounded during the month of March resulting in stocks ending the quarter where they began. Treasuries and other high-quality, long-dated corporate debt out performed their coupon payments as rates fell to near all-time lows.

The exhibit above charts the return of the Russell 3000, a broad based index including both large and small US publicly traded companies. Over the past 18 months, investors have experienced volatility but do not have a lot to show for it with a return of just 2.10% annualized, which is made up almost entirely from dividends.

24 Mar

At EPIQ Partners, we have the good fortune to do something we authentically enjoy every day. One of our core values is to always act upon our high level of intellectual curiosity with a commitment to lifelong learning. We believe this endeavor will prove beneficial to our partners and ourselves.

Over the course of the year, we attend several education and investment conferences. As members of the CFA Institute, we adhere to a code of ethics and standards of professional conduct that makes continuing education a meaningful component to our charters. We understand that it is one of the reasons successful families choose to partner with us. In addition to servicing our partner relationships, we are the ones that pay attention to market fundamentals allowing us to thoughtfully advise clients on how to achieve their objectives.

24 Mar

Interested in a fun, family event?  Join us the afternoon of April 24th for EPIQ Discovery and Leonardo's Basement.

The details are coming together but we are planning an afternoon of hands-on imagination and innovation. In short, we will build something together and be a part of the creative/destruction process.  

We envision a hands-on, family event that celebrates the creativity and community of inspired minds. We plan to design, create and problem solve as a team.There will be fun and refreshments.  

Leonardo's Basement is dedicated to helping people of all ages discover the power of building from their

imaginations.

Sunday, April 24, 2016
3:00p – 6:00p

150 West 60th Street
Minneapolis, MN 55419

Please RSVP to This email address is being protected from spambots. You need JavaScript enabled to view it.

09 Dec

The investment industry does a tremendous job of categorizing the discipline of investing into numerous strategies. Entities involved in managing money extoll the benefits of their approach as to why their approach adds value. It does not matter as to whether it is stocks, bonds, real estate or commodities, or in public or private markets, the debate rages as to how best to invest.

One aspect that comes up for most who invest in equities, is whether to pay up for 'growth' or seek out 'value'. We find this debate and how it is framed, to be foolish. Humans, proclaiming to be rational decision makers (different discussion all together) should always pursue the choice with the highest perceived value. How we define value makes for interesting debate. Anyone who has made an investment decision surely perceives value in whatever they ultimately choose. The market determines the price of financial assets; it is up to the investor to determine whether value exists at that price.

19 Nov

Attitude

Our world is a fascinating place. One only needs to watch the news, scan social media threads or read a periodical for validation. Although the quantity and rate at which we attempt to process information borders on incomprehensible and, unfortunately, because of limited time and the nature of confirmation bias, many tend to seek out only sources they find agreeable.

One of the subjects that we find interesting is the resilience of global economies in a time of sluggish growth, uncertainty and a malignant population of hateful zealots that are certain to end up on the wrong side of history. The recent events in Paris, Beirut, Egypt and Israel to reference just a few (http://bit.ly/1TOEJ8l) make for a degree of concern that is challenging to quantify with analysis or emotion. While we all feel the impact of the events we witness, the focus must remain on the issues that are important and value the things that matter.

06 Oct

What a difference a couple of weeks make, although nothing has significantly changed.

Market volatility has returned and we would like to provide perspective on a characteristic common to all investments, liquidity, or the ability to readily convert an asset to cash or vice versa.

Public markets consist of stock listed on exchanges and registered bonds. Although the ease of executing has advanced dramatically with technology, the basic nature of the market has not. For every transaction, there is a buyer and a seller and the price at which they come together makes the "market". It does not matter if it is a house, a diamond, a car, or an investment instrument such as a share of stock.

As investors focused on fundamentals, we are concerned with factors such as the global and local economies and the operations and earnings of the companies in which we invest. We also pay attention to the credit worthiness of the institutions to which we loan money. Over longer periods of time, the value and return of an investment is highly influenced by these factors. However, in the short-term, anything goes.
With the advent of electronic trading platforms, exchange traded funds, leverage with options and futures, and the overload of data and opinions, it is no wonder the velocity of trading continues to accelerate. As investors ("traders" maybe a more apt description) become more short-term focused, price moves become more pronounced as more dollars attempt to execute the same transaction.

There are a couple of obvious reasons for this:

12 Jun

The title of this blog does not mean we are channeling our inner Yoda. Rather, we are looking for a different way to say, "This time it is different."

Truth-be-told, the six-plus years of economic expansion since the Great Recession is longer than average and gives some, reason to take pause. Would this be a good time to recognize some gains and raise a little cash? Perhaps, but short term adjustments are usually counterproductive when compared to a thoughtful longer term strategy.

One theory for the longer (and slower than desired) recovery from the depths of 2008-2009, was the significant and painful malaise most experienced during the crisis. Investors would rather not live through that scenario again and this emotional response has put a cap on the risk many are willing to assume. So, today we see traditional valuations at reasonable levels based on historical measures. The market continues to slowly move higher because corporate earnings continue to grow slowly.

It is worth noting that those who fail to learn from history are doomed to repeat it and we are careful not to get ahead of ourselves. However, we observe that many of the influential metrics that are used to measure the past and to predict price movements are no longer relevant.

Why? Because this time it is different. The world has changed and it will likely continue to change at ever increasing speed.

08 May

Along with 40,000 of our friends, we attended the 2015 Annual Shareholders Meeting of Berkshire Hathaway (BRK) this past weekend. We do not attend every year but this gathering represented the 50th anniversary of current management's reign.

Tombs are written about Warren Buffett and Charlie Munger and more will come as they continue to lead the company. What was once a mediocre textile business operating in a declining industry and with little future, has grown into the fourth most valued public company in the world by market capitalization (behind Apple, Microsoft and Exxon Mobil). In very humble fashion, we share our observations on why the company has succeeded far more than just about any other in the world.

04 May

Which euphemism best describes today's perception of the market?

    A.  We're climbing a wall of worry
    B.  The market is swimming upstream
    C.  The wind's at our back
    D.  We're walking on air
    E.  All of the above

The first 3 months of 2015 marked the 9th straight quarter of positive returns for the stock market as measured by the S&P 500 Index. A year ago our quarterly letter shared this same fact so now it gets really interesting. We are potentially three quarters away from setting an all-time record for consecutive quarters of positive returns. The previous record stands at eleven and dates back to the early 1960's. As fundamental-based investors, we are far less concerned with past price movements, and more so with future possibilities.

As the macro outlook evolves and current events shape headlines, the basic structure and environment for investors remains unchanged. This may explain why investors of all types continue to experience more of the same. What may be different are expectations, which is a good thing. How?  

 

27 Mar

Patient

Adjective | pa ∙ tient | \'pā-shǝnt\

:able to remain calm and not become annoyed when waiting for a long time or when dealing with problems or difficult people

:done in a careful way over a long period of time without hurrying

                                                                                                                   Merriam-Webster.com

Language is important. The words we use (or don't use) and their meaning have a direct impact on what is intended and understood. Language is a great medium when these two concepts are the same and causes issues when they are not. We are fairly certain that Federal Reserve Chair, Janet Yellen, is very aware of this characteristic of language.

We find it relevant (and mildly amusing) that the same word can have many different meanings and, depending on the audience, the communique can be interpreted differently.

27 Feb

"If you want to have better performance than the crowd, you must do things differently from the crowd."      - Sir John Templeton

Today, we all benefit from vast technological advancements that allow for precision measurement and monitoring of our modern world. Our cars, houses and healthcare are examples where durability or service is vastly improved. This is, in part, by using large amounts of data to make better decisions in the development, manufacturing and marketing of just about everything in which we come in contact.

The area of investing is no different and has also benefited. One statistic that is commonly used to measure performance is tracking error. Its development is to help investors determine the quality of historical performance and is defined as a divergence between the price behavior of a portfolio and the price behavior of a benchmark (http://www.investinganswers.com/financial-dictionary/mutual-funds-etfs/tracking-error-4970).

30 Jan

As Charles Dickens wrote in his epic novel, A Tale of Two Cities: "It was the best of times, it was the worst of times....."

There is no shortage of market pundits expounding their views about prospects for the financial markets. This is nothing new, and one can cherry pick data to support just about any thesis or rational. 

07 Nov

Investing can be a challenging endeavor. Since the end of the third quarter, there has been a flood of information and policy changes that could lead to meaningful shifts in strategy. Certainly, there is no shortage of data points. And while it is key to understand connections and multi-variable regressions, it's necessary to focus on what is important instead of becoming lost in the analysis.

The first two weeks of October tested the resolve of long-term investors as global conditions communicated a slowing growth trend, falling energy prices, and the end of the Fed's bond purchasing program (quantitative easing). Bear in mind that "slowing growth" is still growth and "accelerating growth" is unsustainable. A global economy at terminal velocity only ends with a smack against a wall.

 

28 Oct

With just over two months remaining in the calendar year we are reminded that the one constant is change. In last quarter's letter we discussed "euphoria" and that investor sentiment had come a long way over the last 6 years, and how one of the next stops on the emotional train could be bliss. This could also represent a dangerous emotion as investors become complacent. Our vantage point is that investing remains a challenge and it is not likely to get any easier.

13 Oct

Over the past couple of weeks, the volatility in stock, bond, and currency markets has returned. The U.S. stock market, as measured by the S&P 500 Index, just posted its seventh consecutive quarter of positive returns (ending September 30). It's a feat not experienced since the mid 1990s, when the Asian currency crisis broke 14 periods of positive returns. The result is that we have grown accustom to positive returns.

Today we are experiencing a repricing of risky assets, and this usually happens faster in falling markets then in rising ones. Interestingly, we seldom see investors and traders express concern when markets are going up quickly.

29 Sep

During a recent conversation with an influential professional, it became apparent that it might be unclear exactly what we do at EPIQ Partners. In an industry with numerous choices, structures, and competitors, it is important to highlight what differentiates EPIQ and explain our strategy to deliver value in meaningful ways. For existing clients reading this post, we know you already "get it" and are experiencing the EPIQ difference. We thank you, because it is wonderful to partner with people who truly get it.

In short, we invest to meet clients' objectives while respecting their appetite for risk. We are significantly aligned with them and constrained only at their direction. To do this effectively, we spend significant time understanding their goals and objectives and work to deliver the best of what is possible for the situation.

 

27 Aug

The first annual EPIQ Clambake was held on August 21st at the Calhoun Beach Club. Gathered together were partners, supporters, and friends. We ate, learned some, and ate more—but most of all—celebrated.

Thank you to those who were able to attend, without whom there would be no EPIQ Partners and no EPIQ Clambake. It is hard to believe that EPIQ will commemorate its second anniversary next month. We are proud of our affirming results as investors and as business owners focused on the value of long-term relationships. In the years to come, we look forward to continuing the Clambake tradition as a gathering for people who want to have fun and learn a little about our world.

30 Jul

Merriam-Webster defines "euphoria" as "a feeling of great happiness and excitement." This may be an appropriate description of investors' emotions in the next phase of the bull market. As the depths of the financial crisis become closer to "long-ago history" with each passing day, investors, as a whole, continue to gain comfort that the world is not going to collapse. We navigated the recovery, survived complacency and now look ahead to the next part of the cycle feeling to some like it will be the best. However, history has proven it can be the most dangerous and you do not when it's over until it is too late. 

The 2014 second quarter marked the sixth straight period of positive returns for the stock market as a whole. This is an interesting factoid and not without precedent. In fact, we are only halfway toward setting a new modern history record for consecutive quarters of positive returns (as measured by the S&P 500 Index). The previous record stands at 11 quarters and dates back to the early 1960's. While reviewing past performance in a historical perspective can be of interest, as fundamental-based investors, we are far less concerned with prior price movements and focused on future possibilities. Returns moving forward should be independent from those that came before it.

 

28 May

Reading for pleasure is an important endeavor that keeps the mind absorbent, informed, and imaginative. The topics and titles we choose might not be the first, second, or third choice for others, but that is the beauty of books. There are so many of them, and they can take you to so many places.

We recently finished a couple of reads that are worth sharing:

     • Flash Boys by Michael Lewis
     • The Nature of Investing by Katherine Collins

 

29 Apr

As investment professionals, one of our challenges is composing communiques that remain relevant for more than five minutes. Information and opinions are disseminated continuously in our connected world, and what seems like a timely or insightful thought can be outdated or proven inaccurate by the time the intended recipient receives the message. With that said, we remain committed to communicating our thoughts and convictions.

During the first calendar quarter of 2014, U.S. equity market averages eked out positive returns of 1.8% for the S&P 500 Index and 0.8% for the technology-centric NASDAQ. This marked the fifth consecutive quarter of positive returns. The last time this occurred was from Q3 2006 through Q3 2007; however, it is not uncommon. During the past 50 years, the S&P 500 Index has experienced eight periods of at least five consecutive quarters of positive returns, with the longest streak lasting 11 quarters in the early 1960s.

At EPIQ, we attempt to avoid the practice of data mining convenient facts that support our thesis. We prefer to stress traditional measures of value to assess the risk/reward relationship that a security or sector presents at any given time.

27 Mar

EPIQ Partners exists as a boutique investment office for successful families.

The interesting thing about success is that each person defines it differently, and the link between happiness and success exists but changes over time. Successes that made you happy yesterday might not deliver the same joy tomorrow. The research behind success and happiness is fascinating. The more we learn about the way our minds work, the greater our probability to reach successful outcomes.

Check out this informative video on the incentives that drive people to work, achieve success, and feel happiness through autonomy, mastery, and purpose: Drive - Dan Pink.

We believe people are happiest when they are:

  1. Achieving goals that, at first, seem out of reach
  2. Belonging to part of something that is bigger than themselves
  3. Helping others accomplish something of significance.

Thank you for taking the time to review. We wish you success and happiness in all your endeavors.

24 Feb

Last May, we penned a blog commenting on the impending changes to the U.S. Federal Reserve (Fed) policy on the fiscal stimulus and monetary policy (http://www.epiqpartnersllc.com/blog/item/50-hold-on-change-is-likely-and-we-believe-it-is-good). Now that the central bank is two months into its policy of removing the unprecedented stimulus, we thought it a good time to update our expectations.

As we have expressed in the past, we believe that predicting the movement of interest rates is a futile endeavor and does not, in itself, add much value. The history of "investors" making money betting on the fluctuation of interest rates (or currencies) is thin relative to those who speculate in this area.

 

27 Jan

We are thrilled to report on 2013, our first full year as an investment advisory firm. We sincerely thank our founding partners for believing in us and sharing our vision for EPIQ Partners and what is possible when it comes to personalized investment management. 2013 was an affirming year. What began as a concept late in 2012 now has a solid infrastructure and investment process to deliver the best of what is possible for our clients. We have grown our client base purposefully and assembled an advisory board with members who have a wealth of knowledge and expertise.  We are fortunate to have their guidance to help steer our growth and strategic direction.

Over this short period, we benefitted from strong U.S. equity markets led by healthcare (especially biotechnology), financial and technology sectors. In general, small- and mid-sized growth- oriented businesses were all the rage while investors in high quality, fixed-income investments were challenged to recognize a positive return. We took advantage of pockets of opportunity, and identified attractively priced securities issued by companies with strong cash flows and balance sheets, resulting in solid returns.

 

30 Dec

Recently, the Chairman of the US Federal Reserve (Fed) spoke for the final time before his term ends in January. In our opinion, Ben Bernanke has done an admirable job leading, what is arguably the most important financial institution in the world, during a period of great stress.

After the Fed brought the overnight funds rate, the Fed's main tool for influencing economic activity, to 0% in 2009, they went on to engage in quantitative easing (QE) by purchasing longer dated government bonds and agency backed mortgages. This was done in an attempt to further stimulate the US economy from the depths of despair by pumping in mass amounts of liquidity into the economy. It seems to have worked so far. The recent spate of economic data indicates that the US economy is recovering at a measured pace. 

06 Dec

It has been beneficial to own equities during the past few years—especially in 2013. Whether it stems from increased earnings, expanding multiples, quantitative easing or the continued rotation away from low interest–bearing fixed-income, equity investors have seen the value of their holdings increase.

We offer another explanation for why the US stock market continues to rise: the basic economic concept of supply and demand. For many years there has been a significant increase in share buybacks by companies. The data illustrate a general trend.

During the past 10 years, the raw number of total outstanding shares from companies in the Russell 1000 Index (the 1,000 largest companies in the US) actually declined in spite of the increase in the total size of the economy. It is important to realize that the composition of the index changes year to year. In addition, nearly 100 companies no longer exist from 10 years ago and the index frequently adds new companies.  Interestingly, during this time period the capitalization (or market value) of the index increased from $11.3 trillion to $19.3 trillion, a 41% percent jump, according to Bloomberg.

How does this happen? Bankers—and their clients—arranged far more mergers and acquisitions in recent years than initial public offerings or sales of additional shares. This tipped the balance toward reducing available shares instead of putting more into circulation.

23 Sep

At the end of May (see prior blog post http://www.epiqpartnersllc.com/blog/item/50-hold-on-change-is-likely-and-we-believe-it-is-good), we expressed an opinion on the Federal Open Market Committee (FOMC or 'the
Fed') that if it chose to begin winding down its unprecedented bond-buying program, it would be a good sign and welcomed by the market.  Since then no significant change took place, and while that was good for equity investors (and not so good for fixed income markets), it's clear to us that it could be some time until the Fed begins to pull back from that program.

As the memory of the financial collapse of 2008-2009 grows more distant, remember that a great deal of the recovery is due to the tsunami of cheap money that the Fed (and other central banks) has poured into the
economy.  Even though domestic and international economies are improving, they are not cured.  In fact, we are far from it.

16 Aug

According to Business Week, a simple six character password – all lowercase – can be cracked by a hacker in just 10 minutes, while a nine character password using letters, uppercase, numbers and symbols will take 44,530 years to breach.  With increasing news of hackers invading large corporate operations, government offices, bank records, and numerous individual email, Twitter and Facebook accounts, it's shocking to learn that 50 percent of computer users today still only employ a one word password, such as "password" or "12345678" to protect their online assets because they (we) believe "this will never happen to me."

 

31 Jul

The long days of summer allows more time to reflect.  That is, if you do not find yourself running around to fit it all in; earlier morning exercise, visits with friends, work, kids'/grandkids' activities, some time on the lake, events and festivals, more work and a glimpse of the sunset at the end of a long day.

By far, the most important activity for us is taking the time to think about what our clients are striving to accomplish.  At EPIQ we are purposeful when carving out time to think; about their investment structure, positioning and opportunities that are the best of what is possible for them.

Our thinking today reveals:

  • An economy that is neither too hot nor too cold and that provides for favorable conditions for quality businesses to build shareholder value.  This goldilocks era is not as robust as we may want but it is not as bad as many pundits spew.  Thoughtful investors should be rewarded over time.
  • Interest rates have moved higher in recent weeks but remain near historically low levels. We do not expect to see wild inflation nor drastic action from central banks.  The signaling has been clear from
    Bernanke and the markets are digesting this rhetoric in a relatively smooth manner.
  • There are fewer public companies today (and fewer companies becoming public) than in years past.  As a result, the opportunity set for investors continues to shrink.  With less "float" to absorb capital and many companies implementing buy-back programs the shrinking share count should help push per-share earnings higher and provide support to the price of said shares.
  • There must be openness to other opportunities/alternatives for investment capital.  We have spent a
    fair amount of time looking into several non-public investment vehicles.  As the parameters for each are unique, a great deal of due diligence (and client education) is required.

Thank you for taking the time to read this and please let us know your thoughts.  We are happy to engage in
a conversation in the things that interest you.  Enjoy the rest of your summer.

28 Jun

Changing commentary from The Fed has brought the return of volatility to the markets.  Daily swings of 100 points or more in the Dow Jones Industrial Average over the past several weeks are dominating headlines and raising the ire of some investors.  More dramatic from our perspective is the rise in interest rates of over 50 basis points in a short period of time (please see our previous post).

But this we know:

  • The strong equity markets experienced since March 2009 will not continue unabated.
  • The cheap (errr, free) money supplied by an accommodative Fed is unsustainable in the long-run
  • Given all the global uncertainty and unrest – the U.S. dollar should remain as the global standard
  • Triple digit moves can trigger an emotional response from those with exposure to the equity markets.
  • Bond investors need to reexamine expectation and risk tolerances.

30 May

This past week the Federal Open Market Committee (FOMC), signaled to investors potential policy changes that may lead to higher interest rates.

Four years ago, the Federal Reserve took unprecedented action to stave off what was widely viewed as an impeding global financial collapse by dropping the Federal Funds rate - the rate commercial banks loan to one another - to essentially 0%. Who says there is no such thing as free money?

The purpose of this action was to motivate investors to accept risk rather than bank it while earning nothing. As an analogy, think of a gathering where there is music, lights, food, beverages and lots of people, but no party. To get things grooving, the Fed hosted an open bar instead of charging regular or even happy hour prices. It has taken four years to get the party started and now that the economy (party) looks to be slowly taking off, the Fed announced last week that it may soon start charging, at the very least, happy hour pricing --as early as next year.

So party-goers (investors), let’s get ready so we don’t have the same issues we experienced when a similar event back in 1994 took place, where the punch bowl was taken away from the party before everyone had dipped in for a drink. Nearly 20 years ago the Fed raised rates from 3% to 6%, and even though then-Chairman Alan Greenspan sent plenty of signals that rates were headed up, the move still shook the credit markets when it happened.

So back to this latest FOMC announcement, what does this mean to financial markets in the short and medium term? We will likely experience an uptick in volatility, which means that stock prices won’t be going up four out of five days a week and bond prices may be challenged. We’re already seeing pressure on bonds of all stripes.

There are many who predict that bond prices have peaked and will fall hard while interest rates rise. For the past six years, many financial gurus have felt this would be the case but have been wrong, or perhaps just early in their predictions. This is why we stress short maturities for our fixed income investments. This strategy has worked, but not to the degree as buying long term bonds.

Now, the largest player in the bond market—the Federal Reserve—has stated that the time is coming when its hosted bar is going to be closed. We believe this is a really good thing for the long term. It is not sustainable to run a business when all you do is give away your products and services instead of charging for them. The Fed believes it can start running the dance hall like a real business and party goers will continue to come even if they have to pay for drinks and appetizers.

For equities, valuations are fairer than any time in the recent past and as earnings grow so should share prices. This goldilocks economy - where things aren’t too hot or too cold - continues to warm up slowly, which has historically proven to be an ideal time in the market cycle for strong risk-adjusted returns.

Under the scenario we have painted, business leaders, who drive the real economy as opposed to the price of stocks on a given day, can have more confidence than in the recent past to invest and expand their enterprises. This should help stem “un” and “under” employment, which in turn should lead to more confidence and better economic conditions. But be aware, as we see an improvement in the economy, we may face different challenges as the Fed might feel the need to slow down the economy so inflation does not become the next issue. See the pattern?

Where does EPIQ stand?

We continue to invest in great businesses and business leaders. This time of year brings many annual shareholder meetings. We have attended several, including a pilgrimage to Omaha for the Berkshire Hathaway/Buffett-fest weekend. With a bit of cash and an eye for opportunity and non-correlated, alternative asset classes, we feel well positioned for the on-going party of investing on behalf of successful families.

30 Apr

-   ”Chum in the water” as public companies report first quarter results

-   Why computerized trading just isn’t for us  

More than 50% of companies have reported result through March 31st, and we are in a frenzy analyzing the companies we follow. Let us share some of our observations:

  • Earnings results have been positive to this point and generally well-received by investors evidenced by continued buoyancy in overall stock prices.
  • While earnings are strong, revenues and future guidance are less robust, indicative of a continued slow-growing economy.
  • Business productivity continues to improve and is the true driver of profit growth.
  • Companies are returning capital to shareholders through share buy backs and increased dividends.

While the past several months have produced terrific returns for equity investors, we believe that until revenues show signs of consistent sequential growth, it is unrealistic to believe the markets will continue to appreciate at this torrid pace.

11 Mar

listening ear

The “Market” as measured by the Dow Jones Industrial Average is at an all-time high!

The media is flooding the market with news of the Dow Jones Industrial Average’s (DJIA) climb above 14,000 earlier this month – the first time since 2007. Television, radio, newspapers, the Internet – coverage is widespread and creating quite a flurry of conversation among investors. But the question we think is most important at this moment is “So now what?”

Conventional reaction follows to two disparate paths: 1) All is well, the pain is over and we finally feel good enough to believe in this recovery or 2) We have run too far, too fast and a correction is right around the corner. The EPIQ Partners’ approach is to be thoughtful about important perspectives and meaningful variables while keeping our analysis on relevant and real metrics.

21 Feb

Launch Celebration - With deep appreciation and humility, we thank you.

On January 31, we hosted breakfast, lunch and a reception for friends and supporters as we made it known that EPIQ Partners is officially launched and we are welcoming new clients. Early results are affirming and we move forward with gratitude and enthusiasm. Thank you for taking an interest in EPIQ. Please call on us if we can help you in anyway.

 

EPIQ Thoughts - We take the “Partners” in our name to heart.

 PARTNERSHIP — Merriam-Webster definition:

  1. the state of being a partner: participation
  2. a legal relation existing between two or more persons contractually associated as joint principals in a business
  3. the persons joined together in a partnership
  4. a relationship resembling a legal partnership and usually involving close cooperation between parties having specified and joint rights and responsibilities

Ask five investment professionals the best way to invest and you’ll get eight differing opinions. In today’s environment, there are enough ways to deploy capital to make your head spin and most strategies can be backed up with data to support each marketing claim. Of course, future results will be based on how relevant a given strategy is to future market direction. In short, all strategies work — some better than others — but none work over all periods of time.

14 Jan

Is there a yellow brick road that investors should follow?

Wearing the badge of "investor" in today's world can seem as daunting as traversing the Yellow Brick Road to the City of Oz. Having the courage of a lion to deploy capital toward any objective —appreciation, income or preservation — requires a strong combination of intelligence and heart.

The theater surrounding the Fiscal Cliff made for high drama, but, in our opinion, little was truly resolved. The spending side is far more complex (and important) than increasing income taxes on 0.6 percent of households. Furthermore, the recurring debt ceiling dilemma gives Washington actors another opportunity to negotiate "in good faith" and bring a long-term resolution that is sure to be in the best interest of all citizens (roll eyes here).

Download the full article below. 

19 Dec

 

Here We Go!

EPIQ Partners, LLC is a boutique investment office for successful families and their related interests. Thank you to the "founding partners" that believe in us and our vision. We are excited for what lies ahead and are able to do so because of your support. We are thrilled to pursue our vision as investment professionals. Many things go into establishing a business, and while we are certainly biased, we feel our strategy is thoughtful and our early results affirming. As we look ahead, our goal with The EPIQ Times is to deliver information worth reading and a meaningful glimpse of our thinking . That said, if you have a thought or question at any time, we will respond to a call, note or e-mail. Again, with humility and gratitude we say, thank you – for taking the time to read this, for your past and future support, and for the opportunity to compete for business when our services are warranted. It has been said: Dig your well before you are thirsty. Our well is deep and the water table is high – here we go!

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Contact Us

2919 Knox Avenue South, Suite 200
Minneapolis, MN 55408

612.843.4800 office

EPIQ Partners is committed to building long-lasting relationships

Our managing partners believe client intimacy and professional advocacy are what makes this firm special and different from other investment firms. We bring a partnership approach to all of our relationships.

We offer a retainer-based, fee-for-service model to ensure the highest level of transparency and alignment.