Economic Analysis and Investment Advice Track Record
We have posted several documents pointing to our record with respect to investing. Our track record is unusually strong. We invite you to review our record.
Talk on NetNoir from 1998
For your review, we have included a transcript of an on-line chat we hosted with NetNoir. While the returns have varied, those following the advice we gave would have seen investment returns greater than 150%
Mr. Cunningham: Hello everyone. How are you guys tonight?
NetNoir: Mr. Cunningham, tell us who you are and what you do.
Mr. Cunningham: I'm William Cunningham from creativeinvest.com. I'm a socially responsible investment advisor specializing in stocks and bonds of companies owned by women and minorities. I also specialize in general market analysis and more information can be found at the creativeinvest.com website. And that's it. :o)
Question: Mr. Cunningham, should we be anxious about investing in these unstable times? Why or why not?
Mr. Cunningham: In a word, Yes. These types of markets require patience and thought. One must carefully evaluate where they are along the investment life cycle. That is, if you are close to retirement, I would pull out of the stock market now. If, on the other hand, you have ten or twenty years to go until you retire, I would stay invested. I might reduce my exposure to the stock market over the short term by buying CDs or treasury securities, but I would stay invested in the equity market.
Question: If you're invested in a 401k should you pullout now?
Mr. Cunningham: Again, it depends upon how close to retirement you are. If you are within two years of retirement, then I would seriously consider pulling out. If, however, you have a longer time to go until you retire, then I would stay invested.
Question: William, aren't most stocks too expensive at the moment? Isn't a downturn due?
Mr. Cunningham: On the stock question, it depends. It depends upon the company that you're buying, the prospects for the industry that they are in and again, where you are along the investment life cycle. I'm sure Xerox looked expensive in 1969.
Question: What about the new I-Bonds ( Inflation adjusted bonds)?
Mr. Cunningham: Inflation adjusted bonds are a good buy, in my opinion, for investors who have a large enough investment portfolio that they need to protect a core position and make sure that returns on their investments are safe and beat inflation.
Question: Bill, what industrial or service sectors do you like?
Mr. Cunningham: I like utilities, I like Washington Gas Light. Utilities are safe and sound. They are also interest sensitive and safe and sound equity investments with interest rates declining, they should continue to do well. I also like Internet stocks. I know that's a risky proposition for most investors, but I like a portfolio on the equity side that is comprised of very safe equity positions like utilities combined with somewhat more risky positions in some of the Internet companies. Companies like America Online, Netscape and others. In this way, I believe that you can have the best of both worlds. I still believe that the Internet stocks have a great deal of upside potential mainly because no one has still figured out how to value these companies, and the utilities I continue to like because everybody has a gas bill or an electric bill and regardless of whether the stock market goes up 200 points or down 200 points, people will continue to pay their electric bill.
Question: If you had a small amount of money (two thousand dollars), how would you invest it?
Mr. Cunningham: I would invest in a mutual fund preferably a no load fund and I would try to pick a socially responsible mutual fund. On the equity side, the IPS Millennium Fund has only $18.5 Million in assets but year to date they are up 22%. They are a no load fund.
Question: What do you mean by socially responsible fund?
Mr. Cunningham: I mean a fund that considers the social impact of the business activities of the companies that the fund invests in. For example, a socially responsible fund would probably not purchase tobacco company stock.
Question: At what age did you begin investing?
Mr. Cunningham: My first job while I was still in high school was working for a credit union that catered to low income people. This credit union was located on Martin Luther King, Jr. Ave. in Washington, DC. I learned about banking and finance there. So, I guess you could say I started my investment career while I was still in high school.
Question: If you borrow from your companies stock fund retirement plan...would you repay it now or discontinue it then start over at a later date?
Mr. Cunningham: Okay, you borrowed money from your company's retirement plan, and you want to know if you should repay that loan now or continue to finance the loan. Is that correct? I would say that of course, it depends upon the interest rate for the loan. I would tend to be in favor of repaying the loan now!!! But, again you'll want to evaluate the cost of the loan versus alternative sources of money. If you are able to borrow at a rate of, let's say 1%, then don't bother repaying now, continue to finance. On the other hand, if the interest rate on the loan is 15% ... pay that bad boy off now.
NetNoir: Bill, give us your web site address again and phone numbers.
Mr. Cunningham: www.creativeinvest.com. 866-867-3795
Question: What if you have held stocks in Asia and now they've lost value. Should you just hold on for another decade if you can wait? Or get it all out now?
Mr. Cunningham: Ooooo .. a tough one. It, of course depends. My initial reaction would be to try to hold on, but it depends on the size of the position, the country in which you are invested, how close you are to needing those funds, and your tolerance for risk. Oh ... and one last thing: It depends on how strong a stomach you have.
Question: Bill, what about those bond and money market funds?
Mr. Cunningham: I like bond and money market funds. On the fixed income side (bond) I like Parnassus Fixed Income a no load fund that to date has returned 4.48%. I also like some of the utility bond funds. On the money market fund side, I like Citizens Working Assets Money Fund which has returned 3.45% so far this year.
Question: I can wait 15 years before retirement, and it seems that there isn't any other place to invest right now or is there that would be a likely high rate of return in the long run?
Mr. Cunningham: To quote Ed McMahon, "you are correct sir". The stock market has proven to be one of the highest yielding investment environments over the course of the last 50 or 75 or 100 years. Certainly you're better off investing in a portfolio of carefully selected equity securities or in an equity mutual fund than you are keeping all of your money in a CD at the bank.
Question: Isn't the stock market going to jump next week when rates are cut?
Mr. Cunningham: LOL One never knows. I've been saying that the stock market was going to go up dramatically ever since we had that 500+ point drop in August. I thought the drop was due to the fact that all of the adults were on vacation. I was wrong. This is a fundamental shift in the investment environment and you should behave accordingly. I believe caution is the watch word today.
Question: Do you think it could reach 9300 this year as Abby Joseph Cohen does?
Mr. Cunningham: Ms. Cohen works for Goldman Sachs a firm which is in the position to take the market to 9300 if they really wanted to. :o) I doubt we'll reach such lofty levels before December 31, 1998. Keep in mind that I am mainly a fixed income "bond" market specialist.
Question: Warren Buffett says he has $9 Billion handy ready to invest when the real drop comes.
Mr. Cunningham: Good for Warren. I would not be surprised. I keep on my wall a set of quotes from Mr. Buffet. Let me share one of these with you. ... "The first rule is not to lose. The second rule is not to forget the first rule." Also, "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
NetNoir: Our guest is also a specialist on black owned banks. How are they doing? Carver, a savings and loans, is publicly traded. Is it worth a look?
Mr. Cunningham: Carver is a black owned bank operating is Harlem, New York City. They are also one of the companies that we track. Carver Bancorp has a symbol CNY. They closed today at 9 1/8 up 1/4 point on volume of 30,000 shares. We think Carver is a company to watch. Their stock following the trend in the financial services sector has been badly bruised. In addition, we're pretty critical of Carver for not making more money given the opportunities that exist for economic development in Harlem. We also received quite a few e-mail messages from minority business people in New York City and in Harlem who have not been that impressed with the reception they have received at Carver. Still, we are optimistic and think that eventually Carver will realize its true potential, both as an engine for Black economic development and as a standard stand alone financial institution. If you are really interested, e-mail me at email@example.com and let's talk about it.
Question: Are there black owned banks in NY?
NetNoir: There are no-repeat-no black owned commercial banks in New York state.
Mr. Cunningham: That is correct. Carver is a savings and loan, so technically it is not a bank.
Question: Are any other black financial firms, any where, publicly- traded?
Mr. Cunningham: Yes. Broadway Financial, symbol BYFC, closed today at 8 3/4 points. Broadway Financial owns Broadway Federal Savings and Loan, a Black owned S&L located in Los Angeles, California. Several other Black owned banks and thrifts have publically traded stock. Several other Black owned financial institutions have stock that is traded by appointment only, so there are investment opportunities in this sector.
NetNoir: William, give us your final thoughts and web address.
Mr. Cunningham: Let's start with the web address which is www.creativeinvest.com.
FINAL THOUGHTS: I think there are growing opportunities for African American investors to make money in these volatile markets. Certainly some equity positions are attractive. One has to be careful and do their homework and pay attention. I also think that there are a growing number of opportunities for African Americans to invest in African American owned companies. Again, you must do your homework, be patient, and not be too greedy. That's it. :o)
NetNoir: Thanks, William for all your sage advice.
Mr. Cunningham: Thank you and good night. ::::::Waving:::::::
Chat dated 9/24/98.
If you have any questions about this chat, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Creating the First Targeted MBS
We developed the first targeted Mortgage-backed Security investment CRA securitization, an MBS pool backed by loans from minority financial institutions. We designed the investment in 1992. Click here to see a letter from two of our clients for this product.
Security backed exclusively by minority loans
Friday, December 2, 1994
By Edward Kulkosky
Fannie Mae, GE Capital Mortgage Corp., an investment advisory firm, and an institutional investor have joined forces to issue what is said to be the first mortgage security backed by loans exclusively from minority-owned institutions.
Said William Michael Cunningham, president of the advisory company, Creative Investment Research: "This opens the secondary mortgage market to minority-owned financial institutions and the customers they serve. The more access these institutions have to the secondary market, the more mortgage loans they can offer to minority and low-to-moderate-income homebuyers."
Mr. Cunningham's firm says it conceived of the security and identified the institutional investor.
At GE Capital, a spokesman said GE acted as an aggregator of the loans, a role it often plays in securitizations. But this particular group of loans was unusual because all come from minority banks and thrifts.
Ray Sims, president of Capital's Residential Express division, said, "It's reassuring that investors are seeking to purchase pools secured by targeted investments."
The lenders were identified as Brownsville National Bank, Brownsville, Tex., Hispanic-owned; City National Bank of New Jersey, Newark, black-owned; Citizens Savings and Trust Co., Nashville, black-owned; Seaway National Bank, Chicago, black-owned; and Union National Bank of Texas, Laredo, Asian-owned.
Creative Investment says the investor is a pension fund that funded the research required to determine the feasibility of the MBS pool. Creative also is planning to manage an investment portfolio that would hold such securities.
COPYRIGHT 2001 Gale Group
If you have any questions about our work in creating the first targeted MBS securities, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Creating the First Anti Predatory Lending Security
In 2001, William Michael Cunningham, Creative Investment Research, Inc. (CIR) participated in one of the first wide scale home mortgage loan modification projects in the United States. The Minneapolis-based project sought to help 50 families victimized by predatory lending practices. See article, Property Flipping Remediation Yields Investment-grade Security.
As the article notes, "In the summer of 2000, members of FHF met with the Board of Pensions of the Evangelical Lutheran Church in America to discuss how new mortgages might be financed. At the meeting, the Board of Pensions said it was looking for investments that had ERISA-compliant features, which ruled out options such as purchasing below-market mortgages. William Cunningham, Manager of Social Purpose Investing at the Board, suggested creating a Fannie Mae or Freddie Mac product.
Fannie Mae (ticker: FNM) and Freddie Mac (FRE) are government-backed corporations that purchase mortgage loans in the secondary mortgage market. Mr. Cunningham was fresh from testifying the month before on Capitol Hill regarding Fannie Mae's and Freddie Mac's lack of involvement in addressing special housing-related issues such as predatory lending.
As also stated, "Mr. Cunningham is pleased that the Board contributed to realizing a high-impact community investment. He is also excited about what Home to Stay means for future victims of such scams. 'This is a complicated process, since it is the first time that any type of investment-grade predatory loan remediation has been done,. he explained."
We also note that in 2005, Mr. Cunningham served as an expert witness for homeowners in a case against PMI Group, Credit Suisse First Boston, Moody’s, Standard and Poor’s, Fairbanks Capital Corporation, Select Portfolio Servicing, US Bank National Association, as Trustee of CSFB ABS Series 2002-HEI, et. al., in the New Jersey Superior Court Law Division - Monmouth County. His testimony sought to establish that the corporate parties listed above were in fact responsible for facilitating unfair and predatory lending practices.
If you have any questions about Fannie or Freddie, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Creating the Diversity Fund
We created a new style of investing called Diversity Investing. Stocks of the largest companies in the U.S. are included in the model fund. These companies have been selected because they have outstanding investment characteristics and are top performers with respect to four key measures of diversity and inclusiveness.
A diverse corporation has an inclusive work force, marketplace and business community (suppliers, partners and investors). To successfully compete in the United States and globally, companies must reflect the changing population within the ranks of their employees and managers. Increasingly, the faces of our work force, our suppliers and our investors are faces of color, faces of women, faces of people with disabilities, faces of gay, lesbian, bisexual and transgendered individuals, faces of older workers. By integrating diversity into the workplace, companies vigorously tailor their offerings to fit the needs of shifting cultural priorities.
What Is the Diversity Edge?
Successful firms have access to the broadest possible base of customers and suppliers, and multicultural marketing is a proven way to boost revenues. Diversity friendly companies may also have lower employee turnover and higher innovation and productivity, reflective of a culture of inclusion.
The Diversity Index Portfolio NOTE: THIS IS A MODEL PORTFOLIO
Our Diversity Fund webinars review information on the Diversity Index Portfolio, or the Diversity Folio, including information on the portfolio's investment strategy, investment process, investment philosophy, security selection, sector selection, risk management, portfolio construction, proxy voting policies, model investment performance and buy/sell policies and procedures.
News Articles (click on the links below)
If you have any questions about the Diversity Fund, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Predicting the Crisis in Black Banking
As we stated on June 14, 2011, we do not expect any Black-owned banks to be operational in 20 years, a function of several factors. We sponsored a webinar on June 11, 2011 to highlight the crisis and to suggest strategies for dealing with it.
June 14, 2011 - PRLog -- Five Black-owned banks have failed over the past 20 months. In August 1989, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). Section 308 of FIRREA established the following goals:
- Preserve the number of minority depository institutions;
- Preserve the minority character in cases of merger or acquisition;
- Provide technical assistance to prevent insolvency of institutions not now insolvent;
- Promote and encourage creation of new minority depository institutions; and
An objective review of recent performance based on 308's standards would lead to the conclusion that regulators have failed to preserve the number of minority depository institutions. In 1994, there were 55 Black owned banks and thrifts. By 2010, there were just 34. We will list the survivors and forecast how many Black banks will exist in 2020.
Section 342 of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act contains a provision creating an Office of Minority and Women Inclusion (OMWI) at various agencies to monitor the diversity efforts of the agencies, the regulated entities and agency contractors. We will estimate the dollar impact OMWI Offices will have on Black banks. In addition, we will discuss our estimate of opportunities likely to result from plans to gradually phase out federal mortgage giants, Fannie Mae and Freddie Mac.
The Webinar was held on Tuesday, July 26, 2011 at 2pm.
As the Washington Post noted on February 13, 2015, The country's last black-owned banks are in a fight for their survival.
If you have any questions about Black Banking, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Warning the Fed
In our opposition to the removal of a key banking law, Glass-Steagall, we noted our forecast that 10 years after the law was removed there would be a major crisis.
On June 18, 1998, Mr. Cunningham opposed the application, approved by the Federal Reserve Board on September 23, 1998, by Travelers Group Inc., New York, New York, to become a bank holding company. In October 1998, in a petition to the United States Court of Appeals (Case Number 98-1459) concerning the Travelers Group Inc./Citicorp merger, Mr. Cunningham cited evidence that growing financial market malfeasance greatly exacerbated risks in financial markets, reducing the safety and soundness of large financial institutions. He went on to note that::
The nature of financial market activities is such that significant dislocations can and do occur quickly, with great force. These dislocations strike across institutional lines. That is, they affect both banks and securities firms. The financial institution regulatory structure is not in place to effectively evaluate these risks, however. Given this, public safety is at risk.
If you have any questions about our current forecast, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Warning the SEC
On December 22, 2003, December 22, 2005 and February 6, 2006, we warned the S.E.C. and other regulators that our models, created by the firm using the Fully Adjusted Return (TM) Methodology, signaled the probability of system-wide economic and market failure.
Our warnings go back even further. On July 9, 1993, Mr. Cunningham wrote to Mary Schapiro, the former Chair of the SEC, when she was a Commissioner to notify the Commission about a certain, specific investing "scam." A timely warning was not issued to the investing public. That letter to the SEC, dated July 3, 1993, described correspondence to Mr. Cunningham dated July 2, 1993 from an "officer" of the Nigerian Ministry of Finance. The SEC acknowledged receiving this warning, in a letter to Mr. Cunningham dated October 29, 1993.
On December 22, 2003, we warned regulators that statistical models created by the firm using the Fully Adjusted Return (TM) Methodology signaled the probability of system-wide economic and market failure. This was one of the first warnings issued concerning the coming credit crisis. See Page 6.
On December 22, 2005, Mr. Cunningham met with Ms. Elaine M. Hartmann of the Division of Market Regulation at the U.S. Securities and Exchange Commission. At that meeting, he issued a strongly worded warning that system-wide economic and market failure was a growing possibility.
On February 6, 2006, we again warned regulators that statistical models created by the firm using the Fully Adjusted Return (TM) Methodology confirmed that system-wide economic and market failure was a growing possibility. We stated that: Without meaningful reform there is a small, but significant and growing, risk that our economic system will simply cease functioning. See pages 2 and 8.
Our experience includes the following comments to the SEC and others:
- Testimony to the Norwegian Ministry of Finance. February 5, 2015.
- Mortgage GSE's, Predatory Lending and Minority Banks (2007 Prediction: Bear Stearns Will Fail.)
- Fully Adjusted Return (tm) model predicts July, 2015 unemployment will be 5.2%.
- Comments to the SEC on The Annual Government-Business Forum on Small Business Capital Formation. Wednesday, October 5, 2006.
If you have any questions about our warnings to the SEC, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us
Our Contracts with CalPERS
We have been selected for multiple contracts with the California Public Employees Retirement System (CalPERS). We were selected for the Corporate Governance Consulting Pool and for the Diversity Consultant Pool. The California Public Employees' Retirement System (CalPERS) administers retirement and health benefits for more than 1.3 million active and retired public employees.
According to the Fund, "CalPERS seeks to refresh the Corporate Governance Resource Pool by selecting additional qualified firms to provide company engagement support services. CalPERS strives to be a market leader in the area of corporate governance. The Corporate Governance Unit not only works to educate the market place but also to earn excess returns for the CalPERS fund. Governance strategies are expected to earn excess return for the fund while driving market leadership in corporate governance initiatives. This requires access to timely, reliable, in-depth and complex analysis on both companies and industries. Analysis of this type must be of the highest caliber such as 'investment banking' research." See Contract Award notice.
According to the Fund, among other tasks, the Diversity Consultant develops "comprehensive strategies for the CalPERS investment office, including integrated strategies that cross asset classes, so that CalPERS can identify, attract, and retain the broadest possible investment talent, experiences, and perspectives, including emerging and developing investment managers, brokerage firms, consultants, and other financial service providers." The Consultant also reviews "best practices, programs, and policies, and recommend those most pertinent to and appropriate for CalPERS Investment Office; assist(s) in the development and implementation of those practices, programs, and policies at CalPERS. This could include, for example: proactively managing and constructively engaging consultant and emerging investment management firms; developing fund of fund/manager of manager structures that supplement or enhance CalPERS existing programs; developing education programs that increase the diverse pool of talent; developing strategic outreach programs and enhancements to existing programs." See Contract Award notice.
If you have any questions about our contracts with CalPERS, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.Contact Us