We Wish All Our U.S. Readers A Happy Fourth of July Holiday
So Far This Year, What Matters Most Has Been To Be In the Right Place
In the second quarter, investment performance data underscore a crucial insight: performance depended on investors selecting the “right place” -- the right assets, the right geography, the right sector, the right industry, and the right company.
We note particularly that the all-country index outside ex-U.S., and the equal-weight U.S. index, have both produced anemic results just north of a 4% return. Opting for undiscerning diversification globally, or even within the U.S., and failing to select those sectors, industries, and companies within the U.S. where performance has been concentrated, means that your portfolio missed out. In an era of higher-for-longer inflation, that kind of miss has sharper costs. During this period, tactical portfolio concentration has significantly enhanced returns; we think this environment has not yet run its course.
There is a technological innovation-driven transformation (in markets and economies) taking place right now. In the coming weeks we will do a series on why we think the opportunities for investors have the potential to surpass what came from the industrial and internet revolutions of last century.
It is important to be open-minded about what is happening, and we encourage investors to consider if the strategies of the past are appropriate for this changing investment climate. So, if you’re unsure about, or unhappy with how your portfolio may be positioned, give us a call.
A Short Note On An Important Supreme Court Decision You May Have Missed
There has been a steady stream of consequential decisions from the high court, but the coverage given to some may have led you to miss the following case, which we think will prove extremely consequential and bullish for U.S. growth.
The recent Supreme Court decision in SEC v. Jarkesy, where a 6–3 majority limited the power of federal agencies like the Securities and Exchange Commission (SEC) to impose monetary penalties through in-house tribunals, marks a significant shift toward curbing what many see as an overreach of the regulatory state. By ruling that most complaints by agencies seeking penalties must be charged in Federal courts, the Supreme Court has ensured that defendants will have more procedural rights, including a right to a jury trial, which is a fundamental aspect of the Seventh Amendment. This change removes the home-court advantage that agencies previously had in their own tribunals, where they won nearly every case.
Chief Justice John Roberts, writing for the majority, emphasized that the nature of the penalties sought by the SEC -- designed to punish or deter -- places them squarely within the domain of traditional common law, which traditionally requires a jury trial. This stance reflects a commitment to the separation of powers and aims to prevent the concentration of the roles of prosecutor, judge, and jury in the hands of the Executive Branch, thereby protecting due process.
This decision is celebrated by those like us who argue that the administrative state has grown too powerful and lacks sufficient oversight and accountability. Reducing the ability of Federal agencies to unilaterally impose penalties without the oversight of a neutral judiciary is seen as a step toward enhancing the rule of law and making governance more transparent and fair. It potentially fosters an environment where economic activities, particularly in sectors like finance and investment, can thrive with clearer, more predictable rules.
Furthermore, this decision could encourage more balanced enforcement actions and ensure that entities have fair trials, which could lead to a more stable and growth-friendly regulatory environment. Critics of the administrative state argue that such overhauls are necessary to maintain a dynamic and adaptable governance structure that respects constitutional boundaries and ensures that the government remains a facilitator rather than a hindrance to economic growth and innovation.
Thanks for listening, and have a great Fourth of July holiday!
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If you are an investment advisory client of GIM who is receiving this newsletter, please note that the fact that a general recommendation is made of a particular security, commodity, or investment area to its newsletter subscribers does not mean that investment is suitable for you or should be purchased by you. For example, GIM may already have purchased such securities on your behalf or purchased securities in the same industry (and an increase in the position for you may represent too much concentration in one security or industry), or GIM may believe the investment is not suitable for you based on your risk tolerance or other factors. If you have questions about the recommendations in this newsletter in relation to your account at GIM, please contact Tony Danaher, Rudi von Abele, or Aubrey Ford.
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GIM and its principals have certain conflicts of interest in its relations with its investment advisory clients and its newsletter subscribers resulting from GIM or its principals holding positions for its clients or themselves which are also recommended to its clients. GIM may change the positions of its clients or GIM’s principals may change their positions (increasing, decreasing, and eliminating them) based on GIM’s best judgment at any given time, including the time of publication of the newsletter. Factors that lead GIM to change or eliminate its positions may include general market developments, factors specific to the issuer, or the needs of GIM or its advisory clients. From time to time GIM’s investing goals on behalf of its investment advisory clients or the personal investing goals of GIM’s principals and their risk tolerance may be different from those discussed in the newsletter, and the investment decisions made by GIM for its advisory clients or the investment decisions of its principals may vary from (and may even be contrary to) the advice and recommendations in the newsletter.
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