William Smead
Chief Executive Officer
Chief Investment Officer 


 

 
Dear Clients and Prospective Clients: 

Almost two years ago, the Arizona Republic did a feature story on their cover about a talented and successful residential real estate agent located in Paradise Valley, Arizona. He was featured because the Phoenix market had been hot for years and nobody was hotter selling high-end homes than him. Phoenix and its high-end homes were pre-ordained to fall and boy have they fallen.

Pull out yesterday’s Sunday business section of the Seattle Times and you’ll see a feature on shortsellers. It’s the kind of article they write when someone has been on a roll (in this case betting against stocks). Short Sellers have every right to bet against stocks, but the media only wants to write about you when you’ve had a hot hand lately. There were no features on short sellers in the 1990’s, as stock rose dramatically off and on for a decade.

These cover stories come from the media all the time, both nationally and locally. Examples include T. Boone Pickens, Donald Trump and Shawn Alexander (the former Seahawks running back). The media had Boone Pickens all over their covers during the big run up in Oil prices. The price of oil has since been chopped in half and Picken’s Hedge Fund has lost $2 billion.

When real estate was hot, the “Donald” and his smiling face were everywhere. Sell real estate when Donald Trump is popular and buy when he is in bankruptcy court. Former Seahawks running back, Shawn Alexander graced the cover of Sports Illustrated two plus years ago (after being named league MVP). He couldn’t find a team that would hire him at the start of this year. The Seahawks can barely win a football game. The fall from the cover is a hard one.

The media is in love with the Hedge Fund managers and shortsellers who have had the hot hand in the decline of the last few years. We think they and their investors could be singing the blues in two years. Remind me to be cautious down the road when the cover stories are about value buyers like us, who stayed the course around the bottom of the Panic of 2008. We are looking forward to getting to the top of the performance mountain from this difficult valley and believe that it is being set up by the current cover stories.

Best Wishes,


William Smead

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