MacNicol’s Quarterly Commentary – April 2023
With this commentary, we plan to communicate with you every month about our thoughts on the markets, some snapshots of metrics, a section on behavioral investing, and finally an update on MacNicol & Associates Asset Management (MAAM). We hope you enjoy this information, and it allows you to better understand what we see going on in the marketplace.
“The greatest obstacle to discovery is not ignorance…it is the illusion of knowledge.”
– Daniel J. Boorstin
We don’t bank in Silicon Valley…
Nor do we bank on Silicon Valley. Earlier in the quarter, the MacNicol Investment Team distributed a Memo highlighting the key points of our nonexistent relationship with the world’s latest banking blow up. First, our firm has no corporate banking relationships with Silicon Valley Bank (SVB) or any mid-tier US regional bank for that matter. Second, we are not shareholders of any US regional bank, nor do we have plans on becoming one soon. Third, we hold no position of any sort in: Roku, Roblox, Juniper Networks, Rocket Labs or AcuityAds. Those companies had dramatically higher banking relationships with SVB, and we were thankfully spared that drama. Lastly, we do own units of other private equity funds who hold companies with SVB banking relationships. A quick round of phone calls and e-mails revealed that exposures in these companies were minor with no single company having more than double the FDIC insured amount parked in an SVB deposit account. Under FDIC control, funds were returned and critical expenses such as rent, payroll and payments to suppliers were made on time. Given the speed with which SVB imploded we felt it was important for us to reach out quickly, but we also said something else in our Memorandum …
…and that is that your investments are our highest possible priority and we have always taken steps to protect your capital from risk. We began planning for something like SVB years ago. Back in 2016 we figured that interest rates had either bottomed or were in the process of forming a bottom. The pandemic temporarily brought yields even lower (July 2020) but in general our call on rates was a good one. That good starting point triggered a flurry of activity over inflation and a level of obsessing over what might happen if inflation became rampant that bordered on paranoia. Our fears stemmed from our deep concern that policy makers would either not see the signs or be reluctant to acknowledge them. The longer it took central banks to acknowledge inflation as a huge problem meant that combating inflation would be that much more grueling once the battle got underway. And whilst in the process of engaging in a grueling battle, mistakes would be made
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