Permanent problems in the industry
In our view, investors should have little faith left in the mainstream approach to protect them from these severe declines given three permanent problems in the industry:
- An inability to see the big picture
The industry takes comfort in phrases like “markets are efficient” and “no one could see it coming”. In fact, bubbles are often so obvious that experts are blind to them. Most in the industry are so focused on the details of their research that they fail to step back and observe the big picture unfolding. Seeing the big picture through all of the noise requires common sense, adherence to a sound economic philosophy and a keen understanding of human history and behavior. After all, as the philosopher George Santayana prophetically warned: “those who cannot remember the past are condemned to repeat it.” - Misaligned incentives
The industry remains riddled with hidden conflicts of interest and incentive structures that are sales-oriented and not in the best interest of clients. Most investment advisors are not trusted voices for clients, but rather sales teams for Wall Street very far removed from the actual investment research. Further, few advisors share the key ingredient to successful investing – the edge of an entrepreneurial mindset that is found in most prominent business owners and savvy investment minds. - Career risk
Portfolios must look different than benchmarks to beat benchmark performance. Yet, advisors worry that this approach may get them fired in the interim since there is so much focus on short-term results. Most in the industry believe clients may fire them if they perform out of sync with benchmarks. Accordingly, they would rather track benchmarks down 38% when the market is down 40% to be able to say “we did better”. They construct portfolios that over-diversify and do not deviate much from general stock and bond benchmarks because the main risk in their careers is deviating from benchmarks. We think this is the wrong way to invest.
Macroeconomic “Big Picture”
We believe that the “writing is often on the wall” as to the macroeconomic direction ahead. Today, unprecedented government debt and money printing are fuelling what may be the greatest financial bubble of our lifetimes. Despite giving lip service to these issues, the mainstream industry remains largely blind to them and did little to protect their clients from the devastating aftermath of prior bubbles in technology, housing and the stock market. We have asked ourselves, how can an industry full of so many well-educated economists consistently miss what are now deemed to be obvious investment bubbles? We believe this is due to several Permanent Problems In The Industry.
Despite this, there are a select group of leading independent forecasters that have correctly foreseen the big picture and consistently sounded the warning bell well in advance of these bubble bursting. We utilize research from these handpicked experts to shape our own views. By identifying the prevailing macroeconomic trends, we position client portfolios for the environment ahead. It is this ability to position for the big picture that led many of America’s richest families to dramatically increase wealth in the midst of the Great Depression.
Building Portfolios
The construction of investment portfolios follows our investment philosophy, which is rooted in the belief that an effective process needs to combine the best elements of a Macroeconomic “Big Picture” with an Entrepreneurial-Minded Research Process to uncover unique investment opportunities for the environment ahead. Our philosophy has been shaped by our experiences in the industry and two key insights:
- The mainstream industry is largely incapable of identifying the macroeconomic “big picture” and looming financial bubbles, resulting in devastating losses for their clients as these bubbles burst.
- The best results are achieved by thinking differently and straying from the mainstream advice which is still driven by a Wall Street sales culture.
Today, investors are overwhelmed by too many investment views and offerings to consider. WindRock serves to filter all of these top-down macroeconomic views with bottom-up investment choices to bring clients our top recommendations.
| Outside Experts |
Top-Down Macroeconomic Views: We filter expert big picture views into actionable decisions. |
WindRock Views |
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Resulting Portfolio |
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| WindRock Research |
Bottom-Up Investment Opportunities: We uncover unique investment opportunities to fit the macroeconomic environment. |
| Opportunities with Strategic Partners |
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| Outside Research |
Other Services
Our clients benefit from access to services offered through our network of third-party outside providers which may include lending arrangements (mortgages and secured lending), family office services (e.g. bill-paying, concierge services), and connections to leading tax accountants, estate attorneys, and insurance providers, etc.
Unique Private Opportunities
Investors’ immediate challenge today is finding reasonable returns in a world of compressed interest rates and overvalued markets. We believe investors can take advantage of unique investment opportunities that offer compelling returns today. Our strategic partnership with Iridius Capital provides select investors with unique opportunities in real estate, cross-border international investments and specialty financial services. Currently, Iridius Capital is focused on hybrid rental real estate, developing all-rental communities that deliver a single family home experience.
Financial Assets
Our approach to identifying investment managers is to utilize the best ideas of outside research providers combined with our internal research. We seek proven investment managers as well as low-cost index mutual funds and Exchange Traded Funds (ETFs) that mimic market performance. Our general bias in selecting managers is to identify those with a strong track record of outperformance who are not afraid to be contrarians and will position portfolios based on the macroeconomic forces shaping the world ahead.
In general, we will adjust allocations to stocks and bonds to match our prevailing macroeconomic view. For example, in periods with a heightened risk of a downturn, we will reposition exposure into more nimble and defensive tactical strategies. These tactical strategies involve managers that respond quickly to changing market conditions.
Hard Assets
Unlike financial assets such as stocks and bonds, hard or “tangible” assets represent ownership in physical assets. These assets include energy, agriculture and metals as well as real estate. We identify investments that will benefit as the amount of paper currency in the global system continues to expand. These investments will perform well in the current weak growth environment, but are poised to excel as an inflationary path takes hold. We combine our own research with recommendations from outside research firms to arrive at WindRock’s Preservation Fund strategy. Our strategy is to preserve the real purchasing power of client assets from the inflationary damage caused by currency debasement. The Preservation Fund invests in a diversified mix of assets in the following categories:
- Precious Metals
- physical gold and silver
- mining stocks
- Select Foreign Currencies
- focus on countries with stable balance sheets
- includes energy, agriculture and industrial metals
- Commodities
- current focus on farmland
- Unique Trades
- commodity or industry specific investments poised to appreciate based on anticipated trends
Family Office Solutions
For clients with at least $10 million of investable assets, we enhance our wealth management offerings by serving as our client’s trusted confidant, providing holistic advice and planning services. For this select group of clients, we develop an intimate working relationship with their family to design services to meet their specific needs and objectives. Such services may include wealth planning and capital sufficiency projections, gift planning, securing preferred lending arrangements, and providing education and investment management for heirs. WindRock can also assist in coordinating their financial team of advisors including their estate attorney, tax accountant and insurance provider etc. to ensure that a client’s entire advisor team is working in harmony for the best client experience.
We offer a broad array of wealth management services plus, for investors with more than $10 million, enhanced family office solutions.
Go to Building Portfolios
For additional information, to sign up for our periodic research and analysis, or to speak with a member of the WindRock team, please contact us at:
312-650-9822
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29 West Jefferson Avenue
Suite 2
Naperville, Illinois 60540
1785 East Skyline Drive
Suite 131
Tucson, Arizona 85718
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WindRock Wealth Management
WindRock Wealth Management is an independent investment management firm founded on the belief that investment success in today’s increasingly uncertain world requires a focus on the macroeconomic “big picture” combined with an entrepreneurial mindset to seize on unique investment opportunities. We serve as the trusted voice to a select group of high net worth individuals, family offices, foundations and retirement plans.
Today, in an attempt to offset continued economic weakness, governments are reacting with spending, debt issuance, and intervention in the economy on a scale without precedent in modern history. Although these policies may buy time, they cannot solve the underlying issues. Ultimately, governments will repay debt with their last remaining option – printing more money. As money floods the system, this will drive inflation higher despite continued weakness in the economy.
Under these circumstances, the current conventional model of a static bond and stock mix will fail. It will fail investors in realizing reasonable returns. It will fail investors in preserving their purchasing power after inflation. And it will fail investors in protecting their capital and securing their retirement.
The conventional experts do not foresee such risks. But these same experts missed the bubbles in technology, real estate, and equities. Today they are missing the bubble in government debt and the ramifications of unbridled money creation. WindRock understands these issues and positions clients to not only minimize their risk associated with these dangers, but to profit from them.
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