Dear Friend:

Considering the recent events in the capital markets, the team at Lear would like to share our thoughts.

In addition to the update published titled "A Containable Banking Crisis" by Jim Warner (Director of Research), the following are thoughts on the current situation in banking:

-The investment assets custodied at Charles Schwab are safe and not a part of the Silicon Valley Bank situation.   See note from Charles Schwab: https://www.aboutschwab.com/perspective-on-recent-industry-events.   We do not own the stock of Charles Schwab - as they may face challenges like many other banks in this environment.  However, this does not directly affect the safety of investment assets custodied at Schwab.  The following are two important bullets from the Schwab link above: 

• Investments at Schwab are held in investors’ names at the Broker Dealer. Those are separate and not comingled with assets at Schwab’s Bank. 
• Schwab does not have any direct business relationship with Silicon Valley Bank or Signature Bank, so we do not have exposure to any direct credit risk from either.

-The situation at Schwab and all other banks can change rapidly.  Thus, we are perpetually monitoring the situation to make sure all protected. 

-We do NOT own US regional bank stocks in the portfolio.  Very proud of this fact.   Try finding another firm with ZERO exposure.  

-The stock market (S&P 500) is currently 18% off the all-time highs.  Thus, there has been damage to stocks before the news on Silicon Valley Bank.  In other words, the news of the week could be closer to the end than the beginning of the bear market.    This was the break in the system many worried would happen after the rapid rise in interest rates.  The government is now involved to restore confidence. 

-The portfolio is defensively positioned.  We own gold, fixed income, pawn shop, utility and health care stocks.  There is close to half of the portfolio in fixed income, cash and gold.   In the stock portfolio, we are confident in the names held and their ability to not only survive but thrive in the future.    In fact, this news and the resulting pause in rate hikes by Fed may help some the stocks. 

-In times of market sell-offs, the best opportunities are created.  While we are working to protect, we are also keeping eyes open for opportunities.   We are waiting for the dust to settle before making large moves but do anticipate making small investments over the coming days if opportunities present themselves. 

In conclusion, we understand this can be a challenging time for investors as headlines are unsettling.  The team at Lear has extensive experience navigating difficult times.  We will continue to work tireless to understand this dynamic situation.  I worked at Neuberger Berman (a Lehman Brothers Company) during the great financial crisis and have FIRST-HAND experience from the inside of navigating this type of crisis. 

We take this responsibility very seriously and appreciate the trust in our firm.   This is the time when we shine.   Keeping a calm head when all else are panicking is the key to success in this business.