ELF
Capital Management, LLC
(Endowment
Like Fund Management)
April 11, 2006
This is the ELF Capital Management, LLC Market Letter
for the month of April 2006. If you
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Thanks for your interest and we hope you enjoy the letter.
Today’s
life styles have most of us pressed for time.
We are constantly on the run, multi-tasking, trying to get more done in
a day. Yet, at the same time, we can
often be seen by an observer, wasting time or, at the least, using it
inefficiently. We get caught up in
momentary distractions. We operate on a
transaction-by-transaction basis, often responding to the loudest demands even
if they aren’t the most critical ones in the long run. Wealth building and wealth preservation
activities often fall into a long-run perspective.
The pursuit
of building family wealth requires a strategy.
It doesn’t just happen one day out of the blue. A good strategy requires the wise allocation
of assets. One of the most important
resource allocations one can make in this pursuit is the investment of
time.
There are
1440 minutes in a day. It can be
enlightening and somewhat edifying to spend a week tracking how you spend those
minutes every day. That investment of
time, almost totally at your discretion, is ultimately the most important
investment decision you will make. The
amount of time you have to spend is finite, we can all agree on that. The total amount of time that we have to
spend, however, is unknown to each of us.
Time wisely
spent seldom produces immediate impact.
Its positive effects generally emerge over an extended period. By the same token, wasting time, killing
time, or passing time often doesn’t result in immediate negative
consequences. Wasted time often slips by
unnoticed. How well are you investing
your time? How effective is your wealth
building strategy?
As readers of our newsletter well know, wealth management is
the ultimate goal of all that we do at ELF Capital Management. Yes, we also promote our services; yet, you
will find that we always seek to present thought provoking topics that are
relevant to our wide audience.
This month’s letter, authored by our own Dr.
Time Spent Managing Your
Money
Most
investors spend a good deal of their time managing their investments, tracking
their returns, and looking for hot new tips or strategies. The magazines related to money are full of
tips and advice about where you should be moving your money. The problem is that this advice is given
piecemeal to a broad popular audience without regard for your current
circumstances, including your ability to withstand risk. We often know in the back of our minds that
by the time these tips hit the newsstands the information is already passé to
the smart money. Still, we read and are
influenced by the proffered advice.
A second
consideration here is that the average investor, indeed, even many seasoned
investors spend a good deal of time trying to study the markets, time the
markets and uncover undiscovered nuggets of wisdom. We forget, or we don’t really appreciate,
that our competition comes in the form of professional money managers using
sophisticated analysis to do what we’re trying to do with the latest issue of
Worth and Money magazines. What are the
odds that you’ll wind up a step ahead of your competition? The odds aren’t good, yet we invest our time
in these pursuits. The successes of
these magazines attest to it.
Another
erroneous assumption is that if you are making money, over time, by managing
the specifics of your portfolio, then you are doing very well. Stop for a moment and consider this. You are doing better than if you are losing
money and diminishing your assets, I’ll grant you that. However, what never gets into the equation is
how much you are leaving on the table.
What is available that you aren’t capturing? If you understand that the value of a dollar
today is greater than that of a dollar tomorrow, then it stands to reason that
every dollar you don’t capture costs you a great deal in terms of growth and
opportunity over time. What could your
portfolio look like if a professional, an expert, managed it? Do you think that there is the likelihood
that its long-term performance would be substantially better? I’d say that the odds are very good that you
are losing money today and tomorrow with your do-it-yourself strategy. This doesn’t even consider the return on the
time you invest in these activities as opposed to investing it elsewhere.
Our simple
prescription is to spend some of that time finding a money manager whose
Time Spent Growing Your
Family’s Intellectual Capital
Building on
my advice about finding a money manager whom you can trust, invest your time in
building a network of allies and advisors, partners in the success of your
family. This is about more than picking
a good school or jockeying to get your child in the best teachers’
classes. It involves developing a plan
to find the right subject matter experts whom you can use to anticipate and solve
the knotty issues that confront your family.
Again, what
is involved is research, investing the time in doing the digging to identify
the best help that you can gather. When
it comes to spiritual matters, many people pick the closest church, rather than
the one with the wisest spiritual advisor.
Our selection of an accountant, a doctor, family coach or mentor often
comes from the recommendation of a friend.
While this is better than a random walk through the yellow pages, the
results are often as uncomfortable as wearing someone else’s’ shoes. Do you interview your advisors? Do you dig into their
There are
no shortcuts in gathering a group of subject matter experts dedicated to
ensuring that your family has the right help in times of growth or crisis. You have to invest the time. But to do that, you have to make the time to
do that work well.
Our
prescription is simple but not easy.
When looking for expert help, interview multiple providers. Be assertive; the good ones will understand
and respect you for it. Prepare a list
of questions and probe. Use the Internet
to understand what the providers offer, their promises and their
When I talk
about the human capital in your family, in addition to caring for the health
and welfare of the family, I’m talking about the character, skills and
capabilities of the people in the family to navigate life successfully. On a routine basis, however, we are so caught
up in the rush of our daily lives that we have little time for those who matter
most to us.
Building
human capital within the family over time requires that family leaders focus
upon the growth of human and intellectual capabilities in the next
generation. During their working years,
most family leaders are so busy tending to making money that they will often delegate
responsibility for the human and intellectual needs of the family to
others. Sometimes, they ignore it all
together, as if it is something beyond their control and so not worthy of an
investment of their time. Then, when
this family’s leader is ready for retirement, the next generation is well
entrenched in their ways.
Do you know
families where someone’s intelligence and hard work have produced great
financial wealth? Have you seen children
in these families who have weak characters, lack of focus or a lack of
discipline or motivation? Perhaps they
feel a sense of entitlement. Perhaps
they harbor fears and expectations that they can’t compete with the success of
their parents. Whatever the cause of
these deficits in these children, observers have little confidence that these
children will be able to continue the upward trajectory of their parents’
success. They will become spenders and
consumers rather than builders.
Do you know
of families of great financial wealth whose members are not happy? Is their attention so focused on making money
that their relationships decay into bankruptcy?
Do people yearn for each other’s time?
Is love and caring expressed materially to the exclusion of
psychological and emotional needs? More
often than not, hard working parents feel that they are showing their love of
family through the personal sacrifices that they make by working so hard. They expect that their spouse or their
children should recognize that gift and be satisfied with it. I’m sorry to say that this is a spurious
assumption. People don’t work that
way. When your family hungers for your
love and attention, material offerings will never satisfy this desire.
Unhappiness,
poor self-esteem, loneliness, and behavioral problems are merely symptoms that
the family’s investment of its time is not producing what the family
needs. Our prescription is simple;
invest more of your time in the stewardship of the human capital of your family.
Pass on the life lessons you’ve learned
the hard way. Take the time to observe,
to talk, to teach and to guide. Take the
time to express your caring in direct and personal ways. It’s an investment that will pay big returns.
In almost
every aspect of one’s life, success requires an investment of time, hard work,
and effort in addressing the elements required for success that you currently
lack. Sustained success requires a concentrated
investment of effort over a prolonged period of time. Are you up to the challenge of doing that for
your family? Sure, it’s hard. The question is, is it an investment that you
see as worth making? The answers lie in
how you are willing to restructure your investments of time and how shrewd
those investments pay out. You can do
this. Your family is worth the
investment.
We’re
At Your Service
With a thirty plus year career helping business executives
and their families realize the human and intellectual capabilities that they
possess, our VP of Client Relations, Dr. Dan Elash, brings a wealth of
capabilities to clients of our firm.
We’re proud and happy to benefit from his experience.
If it would
be helpful send us an e-mail and we’ll send you a copy of our Well Family
Check-Up questionnaire to help you get started.
Remember, it’s all a matter of where you choose to invest your
time. Get it done!
ELF Capital Management Investment Performance Update
The new Fed
chairman, Ben Bernanke spoke in front of the Economic Club of New York in March
and had much praise or the Federal Reserve and the Federal Open Market
Committee. So, should we listen?
In his
speech, Bernanke did acknowledge that the recent behavior log-term interest
rates is less than “clear-cut” and that concerns about the inversion of the
yield curve my not be indicative of a significant economic slowdown. This seemed more of a rebuttal as, in recent
weeks, several analysts have jumped to the conclusion that, since inverted
yield curves have preceded recessions in the past, a downturn is around the
corner. However, what made me admire his
view was a recognition that, because of major structural changes over the past
couple of decades in both the global economy and global financial markets,
there is less than meets the eye in this upside-down world.
After ruminating
over the transcripts of his speech, I can’t say that I’m convinced that a high long-term
interest-rate scenario is likely to result in the next couple of years. Strong economic growth, high oil and commodity
prices have been in place for a couple of years, with only minimal impact on
core inflation. What’s more, the US
Federal Reserve and other central banks are likely to maintain their high level
of vigilance against inflation. Lastly,
it seems that while supply-demand conditions in global capital markets could
become less favorable, such changes are likely to occur slowly.
This is not
to say that the markets could not become temporarily roiled by some rogue
trader starting a rumor that the
Our hard work
continues to reward us. For the month
ended March 31, 2006, our
one-month performance is up 1.71%, our three-month return is up 4.09% and our
one-year return is up 12.55%.
For
disclosure purposes, past performance is not necessarily indicative of future
results and ELF Capital Management LLC (ELF), formerly Hoffman White &
Kaelber Financial Services LLC, cannot guarantee the success of its services. There is a chance that investments managed by
ELF may lose a substantial amount of their initial value.
ELF is an
independent discretionary investment management firm established in February
2003. ELF manages a strategic allocation
of primarily exchange-traded index funds (ETFs), and may invest in other
carefully selected securities. ELF may
also employ hedging techniques, through the use of short positions and
options. ELF manages individual
portfolio accounts for both individual and business clients.
The ELF ETF
Strategy returns presented herein represents a composite of actual results from
all client portfolios managed by ELF.
Currently, it is the only composite presented by ELF and separate client
account portfolio positions are substantially similar, except as may be
modified for retirement plan accounts and accounts with net equity of $60,000
or less. There is no minimum account
size for inclusion into ELF’s ETF Strategy composite and accounts with net equity
of $60,000 or less have a tendency to downwardly skew the combined results.
The
performance data presented herein includes the reinvestment of dividends and
capital gains; as well, ELF’s ETF Strategy composite returns are presented
after deducting actual management fees, transaction costs or other expenses, if
any. ELF charges an annual investment
management fee as follows: 1.25% on the first $250,000; 1.00% on the next
$750,000; 0.95% on the next $4,000,000; and, 0.75% thereafter.
Copyright ©2006 ELF Capital Management, LLC. All rights reserved