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July 28, 2022
Dear WEALTHTRACK Subscriber,
We are in the midst of what could be called the great unwinding. As this week’s guest, noted small cap value investor Charlie Dreifus of Royce Investment Partners wrote to clients recently: “During 2020 and 2021, Washington pumped about $10 trillion of fiscal and monetary stimulus into the U.S. economy - and the result was a relatively minor increase in GDP of $2.3 trillion. Household net worth, however, increased by $34 trillion versus annual GDP of “only” $24 trillion. Individuals were given two years of income in the form of higher values for their homes and securities investments. All of this appears to be unwinding now, and we should expect to pay the price as the economy regresses to the mean.“ Dreifus goes on to write: “Further, our economies and financial markets are being impacted by war, inflation, Fed tightening, higher bond yields, China’s lockdowns, supply chain constraints, Covid waves (including new variants), and the consequences of climate change.“ He rhetorically asks: “What are the offsetting impacts - and how many are there - to balance the considerable risks we face? To me, the scale currently tilts towards an unfavorable risk/reward calculus.” Charlie Dreifus has joined us for an exclusive WEALTHTRACK interview to answer those questions and many more. For those of you not familiar with Dreifus he is an investment legend whose in-depth financial analysis in the small cap universe, and mantra “making money by losing less” have been hallmarks of most of his 50-plus years on Wall Street. Dreifus is Lead Portfolio Manager of the Royce Small-Cap Special Equity Fund which he launched in 1998. He was named Morningstar’s Domestic Stock Fund Manager of the Year in 2008. The fund is rated 4-star by Morningstar and carries a bronze analyst rating. Special Equity’s risk-averse approach means it lags in bull markets, but it’s no slouch. It still captured 80% of the upside. But by design it’s provided protection in down markets, experiencing only 66% of market declines. As a result it has beaten its benchmark with less risk since inception.
I will start the interview by asking Dreifus for his 50-plus year Wall Street perspective. Just how unfavorable is the risk/reward calculus in the market right now? In our EXTRA feature Dreifus shares some timeless investment wisdom from some of his early mentors. If you miss the show on public television, you can watch it on our website over the weekend, along with all of our past programs and our guests’ One Investment recommendations. You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify. Have a relaxing weekend and make the week ahead a healthy, profitable and productive one! Best regards, Consuelo | 
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