Carolinas Investment Consulting // Summer 2016 // The Consultant


Happy Birthday to
Carolinas Investment Consulting!
Yes, we are 15 years old.



George Edmiston

As many of our longtime clients can recall, we opened our doors on May 11, 2001, right in the middle of the Technology Bubble bursting and four months before the 9/11 attacks. The Dow Jones Industrial Average was at 10,821 (recently over 18,500), and the 10-year Treasury was yielding 5.25% (recently at 1.5%).

When we started the firm, a lot of people questioned why we would do this in the middle of a recession. All we knew was that we believed a private, independent firm would best serve our clients and offer our employees a better future.

With the encouragement of our clients, six of us, including Jeanne Kelsey, Lyric Martin, and Chris Grogan, started the firm with approximately 150 families and institutions, overseeing around $350MM in total assets.

From that beginning, the next 15 years were quite amazing. We all experienced two distinctly different presidencies, four major tax law changes, the Great Recession, the bankruptcies of once-admired U.S. companies, the introduction of social media and smartphones, and much more.

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Dustin Barr, CFA

“If you were to distill the secret of sound
investment into three words, we venture
the motto, MARGIN OF SAFETY.”

With terrorist attacks, Brexit, political revolt, the possible breakup of the European Union (EU), negative interest rates, stock market volatility, China’s economy in turmoil, and collapsed energy markets all dominating headlines these days, it can be very daunting to put money to work in the stock or bond markets. Clients often ask whether the time is right to invest given all of the uncertainty we are seeing lately. Here is my best attempt to answer the question:

  • I can’t recall a time that wasn’t uncertain. Looking back on the last seven years, it now seems obvious that we should have bought in 2009 and never looked back. But in 2011, I recall many sophisticated investors who feared an impending double dip recession and an S&P 500 retreat back to its March 2009 lows. Instead, the S&P 500 has nearly doubled since then.
  • Heightened uncertainty often provides good opportunities to invest. The U.S. debt downgrade of 2011 created a tremendous amount of uncertainty and gave investors a chance to buy at lower prices, then to realize significant gains over the last five years.
  • The alternative to investing is to hold cash. Historically, hoarding your money in cash has led to inferior performance, and in today’s environment you literally receive a zero return.

Thankfully, being invested is far more important than timing when to invest. Going back to 1950, an investor who evenly split their allocation between the broad U.S. stock and bond indexes has ever lost money if held for at least 5 years.

In the long-run, markets have a way of compensating investors for taking risk. Even in cases when investors bought at the wrong time, those who held on through the bad times are typically rewarded with a reasonable return. The following chart highlights a 60/40 portfolio’s return if purchased when various crises erupted. Starting with the 1987 stock market crash, investors holding firm over the following 5-year period earned cumulative returns between 43% and 84% despite experiencing painful drops in their asset values along the way.


Benjamin Graham, the “Grandfather of Value Investing” and Warren Buffett’s mentor, coined the term “Margin of Safety,” positing that buying companies for less than they are really worth limits risk of permanent loss. In extremely uncertain times there are always places to find margins of safety. Some have argued that both bonds and stocks are expensive these days, and thus there is no margin of safety. While true that both U.S. stocks and bonds may look less attractive than in March 2009, there are market segments that appear to offer attractive relative value. In looking across the globe, international stocks appear to provide a greater margin of safety than U.S. stocks do these days. The chart below highlights the valuations of U.S. stocks vs. international developed stocks (Europe, Japan, Canada, Australia, etc.).

CIC-graph2Source: Morningstar Direct

The stock market has priced international stocks at a discount over the last few years, while U.S. stocks have continued to charge retail prices – a result of strong returns from the latter. While U.S. stocks may continue to outperform their international brethren in the months to come as the current market momentum favors U.S., attempting to time the leadership change is nearly impossible. Today’s market valuations suggest that the expected return for international stocks is higher than U.S. stocks over a 5-year or longer time frame. Over the long-haul, investors are typically rewarded for buying stocks at attractive valuations. In today’s environment, certain segments of the markets offer investors a greater margin of safety than others.

After years of the U.S. stock and bond markets delivering strong results, it might be tempting to sit in cash and wait for a big market drop, or even to sell laggards such as international equities, emerging markets equities and commodities in favor of more U.S. stocks. History suggests that each of these strategies will leave you with less money than sticking with a well-diversified, rules based plan. Successful investors construct enduring portfolios that stand the test of time and stay invested during the most painful and profitable times alike. And when tempted to bail out of the worst performing asset classes, remember Graham’s “Margin of Safety” principle for rebalancing towards the out of favor asset classes and away from the “hot” asset class. These prudent steps in alignment with your strategic objectives should ultimately lead to happy outcomes.


This presidential election cycle is proving to be one of the most bitterly contested campaigns in our lifetime. Voter frustration, as measured by low approval ratings for the candidates and Congress, is at or near historic levels. Elections matter. However, it is important to note that companies have often succeeded in making money even when they dislike certain policies. Our system of government is also designed to make it difficult for one party or individual to have complete control for too long.
Further, policy making can be a slow process – with potential economic impacts felt even later – rendering market timing based on political outcomes a near futile exercise. While investors are struggling to determine the impact that a Clinton or Trump presidency would have on our country and financial markets, the economy and the markets have proven resilient under both Democratic and Republican leadership.


* Stock market returns are price returns and don’t include dividends. Average annual returns are calculated using year-end to year-end numbers for the S&P 500. During the calendar year of 2001 the Senate changed party control 3 times. It is counted as being under Democratic Party control for the entire year because Democrats held the chamber for most of the year.



During these events, because of your loyalty and faith in our firm, CIC continued to grow and prosper. Today, 25 of us, many of whom have brought to our firm legal, accounting and trust backgrounds, serve over 500 families and institutions, including about 1,500 children and grandchildren, covering 26 states, and responsible for $1.4 billion in assets. Even though we have enjoyed this growth and the increase in capacity to serve, our most important focus will always be our intimate relationships with our clients.

We have all enjoyed and been blessed to have advised our clients in their money management, financial planning, charitable giving, and education of the next generation. We also thank the various institutions who have entrusted us to be part of their mission in serving their foundations and endowments.

That being said, we are just getting started. The entire CIC team and I are excited to carry this firm into the future. We believe that we have never been stronger, and it is our hope that you will get to know every member of our CIC family. We invite you to visit us in Charlotte any time.

Once again, thank you to those who have allowed us to serve you over the last 15 years. May the next 15 be as exciting!


Heather Kortekaas


WE ARE PLEASED TO INTRODUCE Heather Kortekaas, our newest member of the CIC family. Heather joined our Operations team in May bringing a wealth of industry experience having served at a couple of firms in Charlotte. A native of Florida and avid runner, she resides in Matthews, NC with her husband and son.


Kitt Squires

“I am not afraid of storms,
for I am learning how to sail my ship.”

According to a 2015 MoneyFIT Women study by Kelton Global, 92% of surveyed women say they want to learn more about their finances. Unfortunately, the majority also feel uncomfortable talking about money with friends, spouses, family, and even financial professionals. Women reported that the topic was “taboo,” or that they thought it was “impolite” to ask or talk about money.

Poor understanding can make women more likely to be taken advantage of, make poor decisions, feel fear related to their decisions, or simply miss financial opportunities. Participating in a system you don’t understand can also create worry or rob women of peace of mind.

These perils clearly indicate that we need a cultural shift for women to become more empowered investors. Some ways to promote this shift are:

Talk more. Discuss financial concepts with friends and family. The benefits may be surprising. As an example, author William Poundstone suggests that proficiency in understanding how compound interest works is a notable predictor of income, wealth and happiness. “Smart Women Finish Rich” by David Bach offers an excellent introduction to personal finance for women.

Promote education. 62% of women said more knowledge would enable them to make smarter financial decisions. We host client education classes designed exclusively for women. “Fundamentals of Wealth Management” is a good place to start with topics on investing, financial planning, and taxes.

Ask questions. Almost two in three women offered guidance on the retirement plan at their workplace don’t take advantage of it. Encourage the women you know to utilize the resources available to them. Investment consultants, accountants, and estate planning attorneys are sources who should be happy to answer questions.

Financial literacy can provide invaluable comfort and confidence in navigating wealth management – one of the best investments you can make!

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R. Wade Austin
Oliver R. Cross III
R. Christopher Gammon, CFA, CFP®
Christopher K. Grogan
Thomas E. (Ted) Highsmith
Katherine M. (Kitt) Squires
David A. Perkins, J.D., CPA, CFP®
Bryan P. Zeiss
and George H. Edmiston, Jr., President & Founder

Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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5605 Carnegie Boulevard, Suite 400, Charlotte, NC 28209
704-643-2455 |