Have you ever switched advisors only to have the firm you transferred to sell out of every holding in your portfolio, hitting you with a huge capital gains bill that you did not expect? At Stone Creek Advisors (SCA), we certainly take the tax implications of our decisions into account. While risk management is our number one focus and taxes do not drive our investment decisions, they are a factor in our process.

Stone Creek Advisors was founded on the idea that, as an investor, you should not take more risk than is necessary to achieve your goals, and you should not take risks that you are not paid to take. That may sound like common sense, but the reality is many investors are positioned based upon long-term historical market returns which guide future return assumptions for various asset classes without consideration for what their actual goals, objectives, and time horizon are.

We believe the outlook for the economy remains highly uncertain and the risks to the market and economy remain to the downside. There are a growing number of potential black swan events, the fruition of any of which would be catastrophic.

However, the market seems to whole-heartedly disagree. The rally in October and November was fueled by investors hanging on every shred of hope the Federal Reserve will stick the landing and be able to pivot. In the same tune, bad news has become good news again and the market is discounting none of the fat tail risks. The markets aren’t even discounting the risks with higher probabilities today—a recession or persistent stagflation. Reality began to set back in for December, but January has been off to the races. Thus, the title of this letter, “Betting on Nirvana”. We continue to believe that eventually the bill comes due.