Too Much Padding Grom: February 2019 Newsletter

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By Ross Silver, Principal

For those of you who didn’t grow up surfing or aren’t familiar with surfing vernacular, “Grom” is short for Grommet. A Grommet or Grom is a kid (typically high school or younger) who is learning how to surf and surfers in a lineup will routinely call young kids Groms. Groms are inexperienced and as such do not understand the ways of surfing, and older surfers give them a hard time but typically in a manner to help the Grom improve and embody what surfing represents, which is synchronization of mind, body and spirit. I was once a Grom, cutting my teeth on the point and beach breaks throughout Southern California. The older surfers and my friends taught me how to be an all-around waterman and also taught me a healthy respect for the ocean. I bring this up because conceptually the ocean and the stock market are very similar. The stock market is large, powerful and can be a thing of beauty (when you are making money). It can also be your worst nightmare just like duck diving in the middle of what seems to be a never ending set of 15 footers crashing on your head can be.

I am unaware of any generally accepted or correct term for an inexperienced investor, possibly amateur or even rube, but I am going to start calling inexperienced investors Groms and my hope is to help any Grom reading this get smarter. In a market like we are in now, which is full of uncertainty, Groms tend to spend too much time paddling. In surfing, just like investing, understanding where the wave will break and the optimal point of entry is more important than knowing the waves are coming.

When I was a kid I noticed how the older surfers spent very little time paddling and when a big set came through, they were always in the best spots and had the best rides. I eventually grew wise enough to know I should tail the surfers I respected, and try to see what they saw when they positioned themselves for a massive set rolling through. The best surfers, just like the best investors, almost always find the sweet spots and best takeoff spots or entry points into an investment.

While the success of ETF’s has led many to believe investing is easy, that is the equivalent to a Grom thinking every day is going to be offshore winds and A frames at 6-8 feet. Wrong! Nothing works like that and the Groms who continue to think like that will not evolve and move on to something else they can succeed in.  To be a successful investor or surfer you must be patient and when the wave you want comes, be in position to get the best ride possible and don’t chicken out. You can’t feel the wind on your face as you fly down the face of a wave if you don’t paddle into the wave. Just don’t paddle too much or else you might miss the wave or not get the ride you want!

As for how I am investing in this market, I am on the periphery as I don’t trust the middle. What does that mean? I am interested in investing in highly speculative boom or busters as well as a publicly traded collection of funeral homes. I think the DJIA is going sideways given there is no solid consensus on whether this market is moving higher or lower. Given that is my belief, I want to have a high dividend paying safe spot if the market craters. I also want a high flier that will run if the binary turns out positive. Biotech, Cannabis, E&P and Tech are the flier industries I am watching.

The Sylva Sports Desk

This weekend features the professional football championship with the mighty Patriots taking on the up and coming Rams. The whole world has already crowned the Patriots as the champs due to their quarterback and coach being past champions. My friends in the gaming industry believe the Rams have a big chance to win this weekend and so do I. Per ESPN.com, the Rams are currently a 2.5 point underdog which makes no sense to me considering I firmly believe the Rams are the better team. Go Rams!

On the horse racing front, the Pegasus World Cup was profitable for your scribe. I was hoping City of Light would beat Accelerate and a big price would come in second and we got just that, woo hoo! That same day at Gulfstream a freak of nature 3 year old was unleashed named Hidden Scroll. Hidden Scroll broke his maiden with ease on Pegasus Day at odds of 8-1 and earned a massive speed figure in doing so while running on his wrong lead in the lane until about 200 feet from the finish line. Hidden Scroll will be 1-9 in his next race and if he runs back to his maiden race, look out! At the moment my WAAAAY too early Derby top 5 are Improbable (gorgeous stride), Game Winner (bully), Hidden Scroll (freak), Dessman (is he a sprinter?) and Coliseum (tossing last race). Yes, Bob Baffert is once again loaded heading into the Derby.

Have a great month and thank you for reading!

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Greg Harrison has over 15 years of experience as an investment banker and general counsel for public and private issuers. Greg previously held Series 7, 63 and 24 licenses, and holds a J.D. from Loyola Law School (Los Angeles).

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