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Cadinha Blog


Letter to Clients

To Our Clients:

As I enter my 49th year as a professional investor, I have thought much about how some things “never change,” but also about how some things have really changed. In discussing this “age thing” with a high school classmate and dear friend who happens to be in the medical profession, we both acknowledged and marveled at the valuable, yet intangible insight that only experience can give. When rendering a diagnosis, he avows that “I just know,” often to the disdain of the younger doctors who may be better equipped technically, but who “just don’t know.”

The “you just know” phenomenon occurs in my profession as well. I remember fondly my discussions with the legendary Wall Street sage and author, Gerald M. Loeb, also known as the Wizard of Wall Street. We referred to Gerald as “The Wizz,” and I had the good fortune of knowing him. The Wizz became famous when he moved his clients’ monies to cash just before the crash of 1929. He kept his clients in cash for about three years and began buying bargains that bore fruit for an entire generation. As a young institutional broker, I once asked Gerald how to recognize when you are in a bubble. His answer…“You just know.”

There were others that influenced me in one way or the other. These individuals had become “sages,” after successful decades of experience in the investment community. Each developed a personalized method of survival and success, certified by a long career which meant that person endured through wars, bad markets, and good markets and even stale markets. I vividly remember the bad markets of 1969-1970, 1973-1974, 1987, the Penn Central Collapse, the Continental Illinois Bank Collapse, the Vietnam War, Nixon’s Wage and Price Controls, and most important…the election of Ronald Reagan and the implementation of Reaganomics. Market behavior was different in response to each of these events, and I remember each vividly.

Why the trip into nostalgia land? Over the last few years, I have frequently been confronted by clients and friends with the invariable question, “When are you going to retire?” Or as one friend put it recently, “How long are you going to go?” Ultimately, only God can answer those questions, but my simple answer is never. How can I walk away from a passion that still ignites fires? How can I walk away from clients that have become friends, and cohorts that I love working with? After all, aren’t Warren Buffett, Carl Icahn, and Charlie Munger all older than I am? It’s obvious that something drives these men and I seemingly have the same passions.

It is also ten years since I repurchased my firm and placed the leadership role in the hands of Kalei, as President and Neil, as Chief Investment Officer. Two years ago, Kalei was also handed the Chief Executive Officer role. There are other key people in the firm that have earned expanded roles and are performing marvelously, but to save space and your reading time, I won’t get into the names. It has now been five years since we converted to cloud-based technology, allowing us to work from anywhere, and since the beginning of our Park City, Utah office. That operation, under the leadership of Mike Morse is running smoothly, giving Mike some freedom to manage key mainland relationships.

It has also been 20 years since we developed a strategic plan to focus on solely serving wealthy individuals, their businesses, and their families. At that juncture, our firm’s manageable assets were split between institutional and individual clients. With one very special exception, today our firm exclusively serves individual clients. These clients range over 48 states and trust Cadinha & Co. with their assets valued well in excess of $1 billion. I am delighted to say we’ve hit this particular strategic objective. Our current focus is to expand our service level to clients while continuing to grow our client base. You will be hearing more about this in the near future. If you know family or friends who may need our type of service, please let us know.

While my role within Cadinha & Co. has purposefully diminished, my enthusiasm for our firm’s future has not. You see, we have quietly transitioned from a firm dependent on my efforts to one which accommodates my efforts. It leaves me free to pursue my passion of “practicing capitalism” and to work with my wonderful clients. The firm can now assure anyone that in my absence, all client needs can be met. In other words, if I get hit by the proverbial bus, just call my longtime assistant, Robyn. She knows what to do.

In this interesting year, representing several anniversaries, it also happens to be exactly one year since the market hit its historic high. Investors have experienced violent ups and downs with minimal or even negative returns. This is not surprising in a world where risk free returns are near zero, or even negative (negative interest rates are prevalent in many countries). The world’s economy is seemingly teetering between inflation and deflation without a clue as to the outcome. My view is that we are nearing a historic inflection point which is likely to bring significant change for all of us. That change could be very positive or decidedly negative. It will pay to keep our eyes and ears open. How do I know? After 49 years working in the investment vineyard…“You just know.”

About the Author

Harlan J. Cadinha
Founder, Chairman and Chief Strategist




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