MCLENNAN: CRISIS INVESTING

October 30, 2015

First Eagle Funds’ Great Investor Matthew McLennan predicts that we are entering an era of episodic global crises. McLennan is Head of the Global Value Team and Co-Portfolio Manager of several funds at First Eagle, including the flagship First Eagle Global fund, which is in the top decile of its world allocation category and is known for its superior risk-adjusted returns. He’ll explain how he is building an all-weather portfolio to withstand future market storms.

WEALTHTRACK Episode #1219; Originally Broadcast on October 30, 2015
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MATTHEW MCLENNAN

Consuelo Mack

Founding father Benjamin Franklin famously wrote “…in this world, nothing can be said to be certain, except death and taxes.”  To that I would add another certainty: change – and the world is changing rapidly.

Sometimes it comes from unexpected places. Hidden away in the budget bill that is making its way to the President’s desk is a Social Security surprise. Two strategies to maximize Social Security benefits for married couples are being eliminated. We have talked about them with Social Security guru Mary Beth Franklin several times on WEALTHTRACK. One is “file and suspend,” where one spouse files for benefits but suspends collecting them until full retirement age, thus reaping the rewards of higher benefits down the road. It has also enabled the person to collect the accrued suspended benefits if they change their mind. The other strategy being eliminated is frequently done in tandem with file and suspend. It is when one spouse files a restricted claim for spousal benefits, while waiting until the last possible moment to start collecting their own Social Security, essentially being paid while they wait.

The good news is these benefits are being grandfathered in for those taking advantage of them now and there is a six month window for anyone eligible to take advantage of them once the bill is passed.

But as Mary Beth Franklin notes, “future retirees who are younger than 62- those born in 1954 or later- are out of luck.”

The other action adding to uncertainly this week was the Federal Reserve’s decision to keep interest rate policy unchanged, or at zero bound for yet another meeting. The Fed is hinting that its first interest rate hike since June 2006 will take place at the December meeting.

As last week’s guest Michael Hartnett of Bank of America Merrill Lynch pointed out global interest rates are at 5,000 year lows, and the developed world is currently experiencing one of the slowest and longest deflationary recoveries ever. Central banks around the world are engaged in an unprecedented wave of monetary easing to reverse that deflation.

As leading research firm Evercore ISI reported to clients, the balance sheets of the Bank of Japan and the European Central Bank are expected to expand an incredible 30% plus this year, and China has announced more than 70 fiscal stimulus actions so far this year.

Inflation in just about every country is MIA. The two notable exceptions are Brazil and Russia. Both are in recession and are grappling with high inflation.

How this will all end is anyone’s guess, but this week’sWEALTHTRACK guest is not taking any chances. Matthew McLennan predicts we are entering an era of increased crises.  McLennan is Head of the Global Value Team at First Eagle Investment Management and Co-Portfolio Manager of several funds, including the flagship First Eagle Global Fund, which he has run since 2008. The global fund is in the top decile of its world allocation category over the last five and ten year periods and is known for its superior risk-adjusted returns, performing better in market downturns than its peers and benchmark index.

On this week’s show McLennan will explain how he is building an all-weather portfolio to withstand future market storms.

The show is available to our PREMIUM viewers on our website right now and to everyone else over the weekend.  You’ll also find an online only EXTRA interview with McLennan about why he has made a point of devoting much of his free time to educational institutions.

Thank you for watching. Have a great Halloween weekend and make the week ahead a profitable and a productive one.

Best Regards,

Consuelo Mathews Asia

ADD SOME PROTECTION TO YOUR PORTFOLIO

PORTFOLIO PROTECTION U.S. Treasurys:

  • Provide liquidity
  • Money back guarantee if held to maturity
  • Hold up in market downturns
  • Non-correlated asset
  • Can buy at auction from government at no cost, from Treasurydirect.gov

No Bookshelf titles this week.

FOREIGN DIVERSIFICATION

KDDI Corp ADR (KDDIY)

 

  • Price: $12.12 on 10/27/15
  • 52-week range: $10.21 – $13.42

KDDIY Chart

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  • Danone ADR (BSND)
  • Flowserve Corp (FLS) FLS Chart

FLS data by YCharts

This transcript will be available soon. More information regarding WEALTHTRACK transcripts can be found here

Matthew McLennan from the WEALTHTRACK archive:

EDUCATIONAL INVESTMENT

First Eagle Funds’ Matt McLennan has an incredibly packed schedule heading up the firm’s Global Value team and co-managing four mutual funds for the firm including its flagship First Eagle Global Fund, but he has made a point of devoting much of his free time to educational institutions. We asked him why.

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