CIG Asset Management Update December 2020: Farewell 2020
Summary:
- Global stocks built on November’s gains notwithstanding lackluster economic news
- Two large IPOs reflect the extent of FOMO (Fear of Missing Out)
- Positives: The coronavirus vaccine rollout, U.S. stimulus bill finally passed and Great Britain reached Brexit deal
Commentary:
In December 2020, the S&P 500 Index was up +3.7%[i] while the international stocks, as measured by the MSCI EAFE Index Net, gained +4.6%. Emerging Market stocks (MSCI EM) returned +7.2%[ii]. Certain areas of the market continued November’s large gains. Small-cap stocks, represented by the Russell 2000 Index were up +8.7%[iii]. Crude oil added +7.0% to the prior month’s +26.7% gain and Gold was up +6.6%[iv].
As equity valuations continued to trade near all-time highs, U.S. economic data continues to be lackluster. The BLS November Employment Situation Summary showed a gain of only +245,000 jobs versus analysts estimated +440,000[v]. Retail sales for the month of November were down -1.1%[vi].
“Fear Of Missing Out (FOMO)” was exemplified this past month in two red hot IPOs. DoorDash gained +86% and AirBNB’s shares soared +113% on their first day of trading. There was such frenetic buying of Airbnb shares that investors mistakenly clamored to buy call options on ABB, a large European industrial company.[vii] This type of speculative activity continues in the equity markets as the Federal Reserve continues to create more liquidity. Federal Reserve Chairman Jerome Powell said, “Our guidance is outcome-based and is tied to progress toward reaching our employment and inflation goals. Thus, if progress toward our goals were to slow, the guidance would convey our intention to increase policy accommodation through a lower expected path of the federal funds rate, and a higher expected path of the balance sheet.”[viii] Investors seem to believe that the Federal Reserve will come to the rescue and provide even more liquidity if the economy slows.
Several positive events transpired regarding Covid-19. Mid-month, the Pfizer vaccine was rolled out in the United States and United Kingdom. President Trump signed a $900 billion stimulus bill to aid struggling Americans[ix]. Also on a positive note, Great Britain reached a Brexit deal with the European Union on Christmas Eve[x]. Negative events in December included Facebook being sued by the Federal Trade Commision and 48 states[xi] and Apple announcing that it was closing all of its California stores due to the rampant spread of the virus. On January 4, Prime Minister Boris Johnson announced a countrywide lockdown in the UK effective through mid-February as a mutated strain of Covid-19 hit the country hard[xii]. It remains to be seen how hard this latest shutdown action will effect the European economy.
As we start the new year, we remain focused on the big picture. The U.S. stock market continues to be overvalued and equal to over 187% of the country’s GDP[xiii]. Beyond valuation, we keep on being concerned that the markets appear to be divorced from socioeconomic reality. On Wednesday, January 6, the Dow Jones Industrial Average finished at a record high and the Russell 2000 Index was up almost 4% despite the U.S. Capital being breached and the national guard being called out.
Consequently, we continue to apply diversification and vigulent risk management in client portfolios. We endeavor to reach a balance between offense and defense positions to take just enough risk to generate attractive returns to meet client financial goals in these very uncertain times. On Christmas Eve, we added an equity holding to growth and balanced portfolios that may benefit from people working and shopping from home.
We bid the year 2020 adieu and are hopeful as we enter 2021 that vaccines prove to be effective combating the pandemic and the global economy continues to recover. We look forward to taking advantage of positive developments as 2021 progresses.
This report was prepared by CIG Asset Management and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
[i] https://finance.yahoo.com/
[ii] https://www.msci.com/end-of-day-data-search
[iii] https://www.ftserussell.com
[iv] https://finance.yahoo.com/
[v] https://www.bls.gov/news.release/empsit.nr0.htm
[vi] https://www.census.gov/retail/marts/www/marts_current.pdf
[vii] Barron’s “From Airbnb to Tesla, It’s Starting to Feel Like 1999 All Over Again. It May End the Same Way.” 12/11/2020
[viii] https://www.cnbc.com/2020/12/16/fed-meeting-live-updates-watch-jerome-powell-speech.html
[ix] https://www.washingtonpost.com/us-policy/2020/12/27/trump-stimulus-shutdown-congress/
[x] https://fortune.com/2020/12/24/after-years-of-negotiations-the-u-k-has-finally-reached-a-christmas-eve-trade-deal-with-the-eu/
[xi] https://www.ftc.gov/news-events/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization
[xii] https://www.cnn.com/2021/01/04/uk/uk-lockdown-covid-19-boris-johnson-intl/index.html
CIG in the News: MarketWatch, “Three ways to maximize your wealth”
With rising taxes and inflation likely on the horizon, what are you doing to adjust your wealth management plan? CIG Capital Advisors’ managing principal Osman Minkara outlines a three-bucket strategy to help you prepare in MarketWatch.
CIG Asset Management Update November 2020: Change and Balance
Summary:
- November was an extraordinary month for stocks globally.
- 0% interest rates and a 64% increase in the money supply create months of speculation, like November.
- Our most important job is to balance the amount of offensive and defensive investments in portfolios given an uncertain near-term future.
Commentary:
Positive vacine news from Pfizer, Moderna and AstraZeneca helped make November an extraordinary month for stocks globally, despite the pandemic still raging in many areas.
Last month, the S&P 500 Index was up +10.8%[i] while the international stocks, as measured by the MSCI EAFE Index Net, gained +15.5%[ii]. Emerging Market stocks (MSCI EM) returned +9.3%[iii]. The standout country returns were two long-term laggards – Spain and Brazil (as calculated by MSCI) – which both increased in the neighborhood of +30%[iv]. Some of the most beaten-down areas of the U.S. market soared in November, including small companies, energy, financials and industrials[v]. CIG’s client accounts tied to growth and balanced approaches generally had one of their best months in the last five years.
Where do we go from here? Near-term performance can be notoriously difficult to predict. As we mentioned in our October update, underneath the surface of a post-election rising market tide, our measures of the underlying health of the markets continue to worsen. For example, on a small scale, recently Zoom Media (ZM) was down more than -15% one day – despite being an essential tool for many and beating investor expectations seemingly on almost every conceivable metric[vi]. When good news doesn’t translate into good stock returns but rather a sharp decline, we perk up our ears.
We, however, remain focused on the big picture. Global stock markets are now worth over $100 trillion, rising to a record high[vii] and equal to 115% of global Gross Domestic Product (GDP), i.e., the sum of all the goods and services produced[viii]. In the U.S., the stock market is unprecidentally expensive and equal to over 180% of the country’s GDP[ix]. While there is great variability about the future, it is likely a mistake to not be careful and thoughtful when buying stocks this expensive.
In markets like November, where the “Fear Of Missing Out (FOMO)” is seemingly driving participants, indepth study of stocks and economies are displaced by emotional biases which are supported by 0% interest rates and a 64% increase in the money supply[x] by the Central Banks. Such speculative behavior is the nature of market cycles and one of the primary elements necessary to create the proper setting for an eventual reversion or change. Last month, we discussed how it appeared that investors in October started to choose between decelerating and expensive large companies versus opportunities in growing and cheaper small companies. Small cap stocks, as measured by the Russell 2000 Index, had their best month ever in November 2020 and gained 18.3%[xi]. Overall, small company stocks are up dramatically off the March 2020 lows[xii] when we added to investments there. While still unconfirmed, evidence of change appears to be beginning.
Our most important question today is how the balance should be set today between aggressiveness and defensiveness in clients portfolios to take just enough risk to generate attractive returns to meet their financial goals in these very uncertain times. Then, how do we apply an active tactical approach and find undervalued investments that are poised to enter a period of market outperformance like the cheaper small companies mentioned above and where client portfolios already have some investments. All year, we have had a plan for more offensive investments if the economy does get better as well as a plan for the opposite outcome. In December, we added to an investment which we expect would increase in value if people stay and shop at home more. As always, we will continue to apply diversification and balance between the appropriate risk and returns.
Please be well and stay safe. We are encouraged by the latest vaccine results but expect a dark, uncertain winter. We suggest continuing to monitor the Johns Hopkins University’s Daily COVID-19 Data in Motion video.
This report was prepared by CIG Asset Management and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
[i] https://finance.yahoo.com/
[ii] https://www.msci.com/end-of-day-data-search
[iii] https://www.msci.com/end-of-day-data-search
[iv] https://www.msci.com/end-of-day-data-search. MSCI Spain Index Net and Brazil ADR Index Net.
[vi] https://finance.yahoo.com/quote/ZM/history?p=ZM
[vii] https://www.reuters.com/article/us-global-markets/world-shares-hold-close-to-record-highs-u-s-markets-close-for-thanksgiving-idUSKBN28601F
[viii] Bloomberg. WCAUWRLD Index as of 12/5/2020.
[ix] https://www.gurufocus.com/stock-market-valuations.php
[x] https://fred.stlouisfed.org/series/M1
[xi] https://finance.yahoo.com/
[xii] https://finance.yahoo.com/quote/%5ERUT/history?p=%5ERUT
CIG in the News: Marketwatch, “How to cut tax bills with smart charitable giving strategies”
As we enter the holiday season, plans for charitable giving are moving to the forefront. This year, the pandemic has reduced giving opportunities while simultaneously increasing need, causing donors to carefully review philanthropic options that include tax advantages. CIG Capital Advisors’ Senior Wealth Managers Eldin Foco and Martin Swiecki outline two strategies to consider in MarketWatch:
How to cut tax bills with smart charitable giving strategies
As we enter the holiday season, many naturally turn their thoughts to charitable giving. This year —clearly a highly unusual one in so many ways — there is even more need to carefully review philanthropic options that also have tax advantages. Click here to read more.
Measure Your Medical Practice’s Performance
Is your medical practice moving forward, standing still, or losing ground? You’ll know the answer if you compare different aspects of your practice’s operations to appropriate benchmarks (as you can do here using the CIG Capital Advisors Medical Practice Dashboard). Benchmarking can give you the data you need to make informed management decisions about the direction of your practice.
What To Measure
There are two types of benchmarking: Performance and process. Performance benchmarking compares a practice’s operating performance internally over time and externally against other practices of a similar size in the same specialty. Process benchmarking compares a practice’s work protocols. By tracking key benchmarks from quarter-to-quarter or year-to-year, you can identify the areas in which progress is being made.
Start by choosing a few indicators that are important to you. For each indicator, determine your objective and define what you’ll measure and how you’ll do it. Keep tracking the data regularly so that you can make meaningful comparisons over time. Here are some of the indicators your practice may want to use in its analysis.
Profitability/Cost Management
Look at measures such as net income (or loss) per full-time equivalent physician and operating cost per physician. Other useful areas to analyze would include operating costs as a percentage of total medical revenue and total support staff cost per physician.
Billings and Collections
What percentage of submitted claims is rejected by third-party payers? Is that percentage higher or lower than it has been in the past? If you determine that the number is increasing, you’ll need to review the quality of your coding. If coding errors are at fault, it’s critical that you tackle this issue immediately.
Examine the percentage of accounts receivable over 120 days. Is it higher or lower than what has been your experience? What about your practice’s fee for service collection percentage or the dollar amount of bad debts per physician? These are measures that you can evaluate.
If you track your copay collection rate for several quarters and see that it is deteriorating, have your front desk staff pull up each patients’ records when making appointments and remind them about past due payments. In addition, remind your front desk employees to ask for copays at the time of service and to request any outstanding amounts.
Patient No-shows
If your measurement of patient no- shows reveals an uptick in the numbers, consider having your staff make reminder calls or charging for missed appointments.
Time Patient Spends in Office
Patients resent lengthy waiting times. You can track the average time patients spend waiting to see a physician or physician’s assistant. Start by giving a percentage of patients (10%, for example) a card that your receptionist time stamps on arrival and collects and stamps again on departure. If the data reveal an increase in wait times, overbooking may be an issue. If that’s the case, you’ll want to reexamine your procedures and time blocking. You may even have to look into adding another physician, physician’s assistant, or nurse practitioner.
There are other indicators your practice can use to evaluate how well it is doing. Keep tracking the data regularly so that you can make meaningful comparisons over time, and be sure to try our Medical Practice Dashboard to see how your medical practice compares to other peer practices nationally. For a confidential consultation with a CIG Capital Advisors medical practice advisor, visit www.calendly.com/yhai.
CIG in the News: MedCityNews, “Why now is a good time to consider exit strategies for your practice”
The coronavirus pandemic has been a catalyst, both supercharging the investment demand for physician practices and accelerating the consolidation trend in the healthcare industry. With strong sale prices on an upward trend, CIG Capital Advisors Managing Director Yusuf Hai discusses in MedCity News what physician-owned practices should know before considering a deal.
Why now is a good time to consider exit strategies for your practice
Independent practices are grappling with increasing technology costs, regulatory requirements, and tighter margins and now may be an opportune time to consider exiting.
As the financial and emotional stress caused by the Covid-19 pandemic drags on, many physician-owners are taking a hard look at their professional — and personal — priorities. For some, that means finally moving forward on plans to exit their practice. Despite the turmoil and uncertainty, now may be an opportune time to make a move. Read more here.
To schedule an initial consultation with a CIG Capital Advisors Business Advisory professional, click here.
CIG Asset Management Update October 2020: A New Hope?
Summary:
- Diversifying to include Emerging Markets helps in tough month for Developed Markets.i,ii,iii
- Continued worries about rising COVID-19 cases and the economy.iv
- Narratives appear to be shifting as more evidence of a potential market inflexion point.
Commentary:
Globally, this month was tough for Developed Markets and not for Emerging Markets. In October, returns for the S&P 500 were -2.8%[i] and MSCI EAFE was -4.1%[ii] while the MSCI Emering Markets was +2.0%[iii]. It was the second month in a row of monthly declines in U.S. equities. As mentioned before, we continue to employ diversification specifically to areas like Emerging Markets to potentially cushion against U.S. equity losses as in October.
Overall, Developed Markets suffered from increasing COVID-19 cases[iv] and in the U.S., diminished hopes of a pre-election stimulus package. The month culminated with a -5.6%[v] sell off during the last week when technology earnings missed expectations, with Microsoft disappointing most in our opinion.
Underneath the surface of a post-election rising market tide, the relative price movement in sectors and investing styles (Factors) appears staggering. Our broad measures of the underlying health of the market continue to worsen. Events happen daily that have either likely never happened before or not happened in a long time. For example, on November 4, the Dow Jones Transportation sector had its worst day relative to the S&P 500 since April 2009, down almost -4%[vi]. Growth had its best day versus Value (using Russell 1000 indices as proxies) since January 2001 – almost 20 years![vii] In our opinion, the market narrative appears to be that the Federal Reserve has everything under control and that it has “got your back.” Meanwhile, we continue to worry about how COVID-19 will affect the economy this winter given the explosion of cases shown by the Johns Hopkins University’s Daily COVID-19 Data in Motion.
In October, we saw the beginnings of a narrative shift to a scenario that reminds us of 2000, similar to what we discussed in our August update. In that market cycle, the technology bubble was formed by companies from buying to prepare for the risk that at the stroke of midnight on January 1, 2000 their computers would be unable to function. In 2020, companies and individuals spent on technology to work from home during a pandemic. In both cases, decelerating earnings occurred once priorities shifted away from investments in technology. Last month, it appeared that investors started to choose between decelerating and expensive large companies versus opportunities in growing and cheaper small companies where client portfolios have some investments. Specifically, the Russell 1000 Growth Index (large) lost -4.7%i versus the Russell 2000 Index (small) gained 3.4%i in October. This shift is potentially bullish for CIG’s portfolios and less so for investors indulging in passive investments[viii].
We would like to thank our clients and friends for their continued trust and support, as well as to respectfully encourage all to focus on the positives on Thanksgiving Day. Obviously, 2020 has been an excruciatingly difficult year for many of us and it continues with the contested election and the division in the country. However, we have a newfound appreciation for going to family gatherings, restaurants and sporting events, for more frequent phone calls with elders, and for being able to see our children during the workday at home.
Lastly, we suggest that you listen to the replay of our webinar “Keeping your Financial Plans Alive Amid Chaos.” We discuss the challenges, opportunities and questions ahead as we navigate the current and future market conditions.
This report was prepared by CIG Asset Management and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
SOURCES:
[i] Yahoo Finance
[ii] https://www.msci.com/end-of-day-data-search
[iii] https://www.msci.com/end-of-day-data-search
[iv] https://coronavirus.jhu.edu/covid-19-daily-video
[v] Calculated by CIG using data from Yahoo Finance for 10/23 to 10/30.
[vi] Research report from Epsilon Theory, “The King is Dead. Long Live the King” dated 11/5/20.
[vii] Research report from Epsilon Theory, “The King is Dead. Long Live the King” dated 11/5/20.
[viii] While small companies as measured by the Russell 2000 small-cap index has had six 10%+ multi-day moves in 2020, per Bespoke Investment Group, the number of underlying companies with negative profits appears to be quite large relative to history and could pose a problem if investors just buy the index versus those stocks which have positive earnings.
Keeping your Financial Plans Alive Amid Chaos
Regardless of who occupies the halls of power in Washington, D.C., we should expect a tumultuous decade ahead. Because frankly, today reminds us too much of the conditions of the late 1930s.
In 2020, interest rates are at zero, government deficit spending is spiraling, national debt is soaring, and many still work from home – amid political panic, our society deeply at odds and our natural environment literally in flames around us.
To see the complete presentation, click here: https://zoom.us/rec/share/MImknez9Qj500ZQX9Ui_zGH2X9b3XK_BbjupWa0zk9jA1pRjAD4vUXqSGRL4Vm0J.OtuuygPZV71w8jGm
This presentation was prepared by CIG Asset Management and is based upon sources and data believed to be accurate and reliable. It is not intended to serve as a solicitation, recommendation, or offer of sale for any product or security. Opinions and forward-looking statements expressed reflect the current opinion of its presenters and are subject to change without notice.
CIG Capital Advisors and its affiliates do not provide tax, legal or accounting advice. This material being presented is for informational purposes only and is not intended to provide, nor be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
If you’d like to schedule a conversation with a CIG Capital Advisors Senior Wealth Manager, please click here or call 248-827-1010.
CIG Asset Management Update September 2020: Continuing Stimulus Hope
Summary:
- Stocks fell in September as big technology companies faltered [i] .
- COVID-19 deaths hit a grim milestone in the U.S. and increased around the world [v] .
- The markets traded up or down based upon the probability of a new stimulus bill.
Commentary:
The S&P 500 declined -3.9% and the tech-heavy NASDAQ dropped -5.2%.[i] Outside of the U.S., developed markets, as measured by the MSCI EAFE net, were down -2.9% and the MSCI Emerging Markets Index retreated -1.8%.[ii] Little protection was offered by Gold as it moved -4.1% lower as the US Dollar Index gained +1.9%.[iii] Fixed income (the Barclays U.S. Aggregate Total Return Index) returned -0.1% and the Barclays U.S. High Yield Index fell -1.0% for the month.[iv]
Republicans and Democrats struggled to come to an agreement to provide more stimulus to the economy. Republicans in the Senate were unable to pass their own “skinny” stimulus bill on September 10. Meanwhile, markets traded lower throughout the month as the COVID-19 death toll in the United States continued to increase and finally surpassed 200,000 on September 22.[v] Over the following two days, there were no less than sixteen Federal Reserve speeches in two days, but investors were unimpressed. Fed speakers reasserted that the Fed will do what it takes to support the economy and cautioned that what is really needed right now is more fiscal stimulus. On September 25, economy re-opening hopes blossomed when Governor DeSantis announced on that he was lifting all restrictions on the Florida economy. The following Monday, stimulus hopes were re-ignited as Speaker of the House Nancy Pelosi said she was hopeful to get a $2.4 trillion coronavirus stimulus bill passed.
September’s weakness in equities and their back and forth nature keep investors on notice that both the financial markets and the economy remain on thin ice. Uncertainty abounds and volatility could increase dramatically on short notice, especially as the election nears. Investors’ latest reminder was on October 6, when these stimulus machinations whipsawed the markets again.
We continue to employ diversification, discipline and flexibility in managing client portfolios to potentially avoid air pockets like the one above. Our focus on clients’ long term financial plans remains paramount.
Please join the team at CIG Capital Advisors for an engaging discussion looking at the challenges, opportunities and questions ahead as we navigate the current and future market conditions:
WEBINAR: “Keeping your Financial Plans Alive Amid Chaos”
Tuesday, October 20 at 6 p.m.
This report was prepared by CIG Asset Management and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
[i] Calculated from data obtained from Yahoo Finance, as of September 30, 2020
[ii] MSCI, as of September 30, 2020
[iii] Calculated from data obtained from Yahoo Finance, as of September 30, 2020
[iv] Calculated from data obtained from Bloomberg, as of September 30, 2020
[v] John Hopkins / NPR September 22, 2020
Optimizing Your Healthcare Practice’s Income
Enhancing revenue and controlling expenses should be a financial focus of every medical practice. Improving operational efficiencies can help bring a practice closer to optimal performance. Here are some ways you can maximize your medical or dental practice’s revenue stream and reduce costs without sacrificing patient care.
Keep Coding Current
Coding errors are all too common. Simple errors can end up costing medical practices money as well as time to rectify mistakes. Delays or denied claims may translate into reduced reimbursements, which, in turn, affect cash flow.
To minimize coding errors, you need to identify the cause of the problem. Typically, miscodes are due to under-coding to avoid penalty risk, using outdated data, or leaving coding decisions to inexperienced support staff. Periodic assessments of your practice’s coding accuracy can help uncover problem areas. These assessments could include a review of your practice’s forms and a comparison of billing codes with the actual services that were provided.
Maintaining updated coding manuals and software, keeping a code reference summary handy in exam rooms, and using online coding resources can help your practice attain a more accurate coding rate. So too will making notes during each patient visit. Be sure to have your staff attend refresher courses to help them stay current with coding practices.
Improve Employee Productivity
Eliminating inefficiencies and boosting employee productivity can directly benefit your practice’s bottom line. Try these approaches to improving the productivity of your practice:
- Define productivity goals and offer incentives to your staff for reaching those goals.
- Delegate administrative functions so that physicians spend the greater part of their day seeing patients.
- Maximize physician and medical assistant billable time by planning patient flow carefully.
Better Control of Staff Time
Are your overtime expenses increasing from quarter to quarter? While some overtime is unavoidable, a consistent rise in overtime hours deserves some scrutiny. Review the payroll records of your non-exempt employees to determine who worked overtime and why. Was your practice fully staffed and simply busy or was it short one or more employees on the days when the overtime occurred? If overtime was necessary because you were short-staffed, see if this was due to vacations or some other controllable situation. It may be time to revise your practice’s policy on vacation time if scheduled time off was the cause of the overtime.
Update Fee Schedules
If your practice hasn’t raised fees in some time, you may want to consider appropriate increases. Just be aware that some patients may be resistant to fee increases and could switch to another provider. In addition, take a look at the reimbursement rates of all the plans you participate in. Run the numbers to determine whether it makes financial sense to continue accepting patients from some of the plans that reimburse poorly.
Buy Smarter
Medical and office supplies make up a portion of a practice’s expenses. Yet, some practices rarely shop around for more competitive prices. You can control expenses by becoming a smarter shopper. Pick some of your practice’s “high-volume” items and find out how much other vendors are charging. Use that information to negotiate lower prices with your current suppliers, consolidate orders with fewer vendors, or switch to new suppliers to save money.
We Can Help
We can work with you to identify areas in your practice where streamlining operations may help optimize your healthcare practice’s bottom line. To schedule a complimentary consultation with a CIG Capital Advisors professional, click here.