March 19, 2020

To our friends and clients,

All of us at MPMG send you our wishes for health and peace as you navigate these unforeseen and unsettling times.  The recent upheaval in our markets, understandably, can add anxiety to your daily environment that may be stressed already.  Please be assured that your investment portfolio at MPMG is being constantly attended to.  MPMG has navigated our clients through many corrections over our 25 year history…and with over 100 years of combined investment experience, we hope knowing that your assets are in experienced and knowledgeable hands provides you with some comfort.

In order to best protect the health and well-bring of our MPMG family, and provide uninterrupted service, MPMG decided to put into effect the firm’s remote workplace plan.  This plan has been well thought out and tested for many years.  The transition has been seamless.  The portfolio managers are in constant contact with one another.  Our trading, research, and all investment processes are without any impediments.  In addition, client needs and communications are being handled by Sarah, Laura and Mikki with their typical precision.  Everyone at MPMG stands ready to serve you.  We are available to discuss any of your immediate or long-term needs, or any concerns about the economy, the markets, or your portfolio.

It has been said that the four most dangerous words in investing are “this time it’s different”.  Our financial markets and economy have faced many challenges in the past.  While each crisis has been unique, the panic driven stock market sell-offs and the subsequent disconnect between stock prices and their true value have been remarkably consistent.  In this regard, this crisis is not different.

Recently a notable economist revised his second quarter gross domestic product down from no growth to a decline of 5%.  To demonstrate how excessive the market’s sell off has been, let’s assume that the economist is wrong and that GDP actually falls by 10% in the second quarter (worse than any quarter during the Great Financial Crisis of 2008).  This hypothetical 10% GDP decline would result in about a $500 billion reduction in GDP in the second quarter.  It is worth noting that many other economist expect that this decrease in GDP would quickly reverse itself upon the resumption of businesses in the second half of the year.  The response by the market to this extreme $500 billion estimated decline in GDP has been to wipe out about $10 trillion worth of value in the equity markets.  In other words, the sell-off in the markets has been 20 times greater than an extreme hypothetical estimated reduction in GDP.

Therefore, we believe that it is reasonable to conclude that the dislocation of stock prices from their true value is once again taking place.  We aren’t alone in noticing this disconnect between price and value.  Executives of many of the companies in your portfolio have been aggressively buying stock of their own companies in the open market.  They are likely to have a good idea of what their companies are worth.  Patience will be needed…and rewarded.

Every major crisis, when you are in the middle of it, feels like it will never end.  You can’t see the light at the end of the tunnel.  Ultimately, of course, the crisis ends and confidence returns.  It is then that investors find out if they had the mettle and skill to make themselves money, or if they lost their focus and made decisions that let somebody else make their money.

As we noted in our previous letter to clients: we are investors, not epidemiologists.  This crisis is real, but so is that fact that it will end.  The Federal Reserve and Federal and State governments are taking unprecedented measures to support American businesses, citizens, and investors.  We are also living in a golden age for science and technology.  Never before has the human race been so well equipped to deal with a viral threat.  Through coordinated efforts among private business and governments from around the world, we are confident that we will get through this soon.

In the meantime, we will continue to focus on managing, protecting and growing your wealth. We are available to discuss any concerns or questions that you may have.

Sincerely,

Phil, Harrison, Rob, Herb, Tony, Sarah, Laura, Luke, and Mikki