“If you look at our website at LePoidevin Group, you’ll see a letter that we wrote in 2007 warning of the [beginning of the] subprime crisis,” he says. “You know, if you watch the movie ‘Margin Call’, it’s like [the crisis] happened overnight … [but it’s] actually something that took many, many months. And there were plenty of warning signs that this was rolling over. So, we got very defensive and had a very large percentage of our portfolio in 2008 in bonds.”
He emphasizes the significance of learning from previous events such as successive interest rate hikes. “The bottomline is don’t fight the Fed – and the Fed had raised rates 17 times and here we are again. [An important lesson] is that markets don’t always go up. So, how do we deal? It’s not [only] ‘how do we make money?’ but ‘how do we not lose money?’ There are two sides that we have to remember. Both are important.”
LePoidevin also points to money supply as the root cause of rising inflation today, saying that monetary authorities “probably went a little too far” in printing cash to offset the impact of the pandemic. To protect the value of their clients’ investments, LePoidevin’s team is avoiding bonds and positioning portfolios in floating-rate preferred stocks, which he says are resulting in “shocking dividend increases” as their rates reset.
Finally, LePoidevin cautions investors about “the intricacies of the financial markets” today, which are different from the situation in the late 1980s when he started working as an advisor. He says bonds are “risky in a rising interest-rate environment” and that investors have far more ownership of equity as an asset class within their portfolios.
