Jericho, NY (October 7, 2014) – The Diabetes Research Institute Foundation (DiabetesResearch.org) is pleased to announce that Bruce A. Siegel of New York, NY, has been elected to serve on its National Board of Directors. He also serves as co-chairman of the organization’s Northeast Region Board, alongside Marc S. Goldfarb.

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Robert D. Rosenthal, Chairman, Chief Executive Officer and Chief Investment Officer of First Long Island Investors, LLC is honored by the New Leadership Division Pediatrics at Cohen Children’s Medical Center.

From left to right: Dr. Marsha Sherman, Robert D. Rosenthal, and Mark Claster, Chairman, Board of North Shore-LIJ Trustees.

For the 25th year, NLD for Pediatrics hosted their Annual Golf Classic at Fresh Meadow Country Club and Deepdale Golf Club in Manhasset, NY. The event honored Robert D. Rosenthal. Over $466,000 was raised to support the Child Life and Creative Art Therapies program at Cohen Children’s Medical Center, which is overseen by trained professionals with expertise in helping children and their families overcome life’s most challenging events that bring a child to a hospital.

“Success is not final, failure is not fatal: it is the courage to continue that counts.”
– Winston Churchill

The second quarter of 2014 was a successful one for our clients. All of our defensive and traditional equity strategies achieved new highs following record-setting domestic equity markets (certain international markets remain below record levels), bond prices remained high reflecting very low interest rates, and our private equity and real asset investments made progress. Despite these gains on top of significant gains last year, investors, including some of our clients, remain skeptical about the future. Thus, the quote above gives us some insight into why we believe that the uncertainty of the investing future should be viewed with cautious optimism.

Specifically, with each of our strategies at record levels, many are wondering where we go from here. The success achieved is never final because we believe there are future gains to be made over the long term. At the same time, a market downturn should not be viewed as failure, for as history has shown, it most likely will be temporary. We remain cautiously optimistic about sensible investing going forward, as long as our clients adhere to a prudent asset allocation and follow our defensive and traditional equity investing that reflect a philosophy of investing in strategies with high “active share.” We will describe high active share a bit later. First, for the record, let us enumerate the items on the wall of worry that investors are rightfully concerned with at this time:

1. Washington is still paralyzed, which is not good for growth, and controversies are still the word of the day (Benghazi, the IRS, the Veterans Administration, and immigration).
2. The geopolitical map is gruesome with wars in the Middle East, Russia still on the border of the Ukraine and perhaps culpable for shooting down a Malaysian Airlines plane, Iran on the cusp of a nuclear bomb, and the kidnappings and murders of teens in Israel.
3. Oil prices are high, which acts as a tax on all consumers and businesses.
4. The S&P 500 and the Dow have not had a correction in a long time, and some would argue that valuations are quite high.
5. The Federal Reserve continues its tapering, and higher interest rates are expected sometime next year, unless the economy falters.
6. The outcome of the Affordable Care Act remains unknown.
7. The middle class continues to be squeezed with very little wage growth in recent years.

On the positive side, the following must be considered:

1. Corporate earnings, on average, continue to grow and are at record levels.
2. Domestic companies’ balance sheets are flush with cash, and some companies have borrowed at very low interest rates.
3. Merger activity is high, causing the price of certain companies to appreciate significantly.
4. Oil and gas exploration in the United States is at a record high, which should lead to energy independence despite certain regulatory hold-ups.
5. Innovative companies with real sales and earnings are going public on a regular basis.
6. Medical breakthroughs are occurring and being led by U.S. companies, including a cure for Hepatitis C.
7. Employment continues to grow on a monthly basis, but with many low-wage and part-time jobs.
8. Consumer balance sheets are stronger than they have been in many years.
9. Housing continues to slowly recover.

So, yes, we have the proverbial wall of worry that is offset by many meaningful positives. While the government’s bickering and lack of bipartisan policy remains unpopular with Americans, business is prospering and benefitting from reasonable global growth:

Projected global GDP Growth Rates through the end of 2014¹:

1. U.S.: 3%
2. Europe: 0-2% (as opposed to recession)
3. China: 6%+
4. Japan: 2%

The above growth rates are encouraging, representing improvement in some cases, and when coupled with certain other emerging countries (such as India, which has just elected a progressive leader), the outlook is reasonably good (however, some countries face the possibility of recession, including, in our opinion, Brazil and Russia). Some U.S. companies are participating in this global growth, which suggests that earnings for some companies will continue to grow. Additionally, the global banking system continues to improve, although some concern lingers in Europe.

¹Strategas Research Partners.

Considering all of the above, our view remains guardedly positive as long as we continue to maintain a prudent asset allocation. Today, that prudent asset allocation must recognize the reality of, for the most part, certain bond interest rates hovering below the level of inflation. As a result, we continue to underweight bonds and are overweighting our defensive strategies. We are also, to some degree, reducing our traditional equity allocation in favor of increasing the allocation to our defensive strategies. Remember, our defensive strategies are designed and expected to produce good returns over time. However, each strategy has an element or elements that give each defensive characteristics designed to lessen the impact of unexpected market downturns.

Now comes the need to have high active share (and define what it is). Our defensive and traditional equity strategies are following the theme of high active share. In layman’s terms, we are using concentrated stock strategies. Our position is that we only want to invest in the best ideas available, as opposed to buying the averages or portfolios that might contain 100, 500, or 1000 companies (diworsification). This position is supported by the research of Cremers and Petajisto², which demonstrated over long periods of time that managers who exhibited high active share were most likely to consistently outperform the market. We continue to believe (and the research cited above supports) that performance can be enhanced by using concentrated strategies with weightings that are meaningfully different from the indices. This strategy should ensure that we are finding the best companies with high probability of earnings and cash flow success (or companies trading at prices well below the values attributed to them by our managers). We believe this will result in better performance in good as well as poor markets over the long term. Of course, we or the managers we use can make mistakes, and not all of the companies we invest in will prove to be successful. Nonetheless, we believe concentrating our investments in a limited number of high-quality companies increases our chances for success and appreciation.

We believe the success we achieved in recent years resulted from a bounce back from the “decession” in 2008, strong global central bank support through low interest rates and bond purchases, record setting corporate earnings, and efficiencies in the operations of companies driven by the bone shaking experiences of the “decession.” Global growth continues to slowly accelerate. Earnings and cash flow for many companies continue to increase. However, valuations reflect much of this growth and are not cheap in most cases. We believe that low interest rates and earnings growth from the companies we invest in will continue to permit our strategies to appreciate.

On the other hand, because of the unknowns in the future, particularly possible higher interest rates and/or declining profit margins at some point, we maintain a defensive, but positive, tilt (higher interest rates should mean the economy is getting better, but the initial market reaction could be volatile). As a result, our investment success is not by any means final at this point. We believe it will continue. Yet, a set back at some point reflected in stock market corrections or a slowdown in housing prices is not failure. In our view, any such setback would be temporary. When any such set back may occur, no one knows. Meanwhile, hiding out in cash or bonds earning a rate below inflation after taxes doesn’t make any sense to us. Valuation, interest rates, earnings growth, and cash flow growth are always in our mind when guiding your asset allocation.

² Cremers, K. J. Martijn and Petajisto, Antti, How Active is Your Fund Manager? A New Measure That Predicts Performance (2009).

It is worth mentioning that we continue to be active in guiding our clients, in concert with outside professionals, in estate, income tax, and life insurance planning. We view this aspect of wealth management as a key value add to certain clients and their families to assist in the passing of wealth from one generation to the next.

Finally, in our continuing efforts to do the best possible job for our clients, we encourage and support the further education of all at FLI. Alone these lines, we are delighted to report to you that Michael Bernstein, an Assistant Vice President and member of our Investment Committee, recently earned the coveted CFA designation. Michael worked long and hard, as well as passed numerous rigorous tests, to become a member of this prestigious institute. His enhanced knowledge is already paying dividends for all of our clients by adding further value to our investment process. I am sure you are as proud as we are of Michael’s accomplishment.

Enjoy your summer and call us at any time to discuss your asset allocation (or that of your clients). We look forward to writing our next quarterly report to you on or around November 1st, and we hope to see you at our next Thought Leadership Seminar in late October (our last one was well attended and provoked great questions about the redevelopment of the Nassau Coliseum and unfortunate loss of the Islanders to Brooklyn).

Best regards,
Robert D. Rosenthal
Chairman, Chief Executive Officer
and Chief Investment Officer

*The forecast provided above is based on the reasonable beliefs of First Long Island Investors, LLC and is not a guarantee of future performance. Actual results may differ materially. Past performance statistics may not be indicative of future results.

Disclaimer: The views expressed are the views of Robert D. Rosenthal through the period ending June 30, 2014, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.

Content may not be reproduced, distributed or transmitted, in whole or in portion, by any means, without written permission from First Long Island Investors, LLC. Copyright © 2014 by First Long Island Investors, LLC. All rights reserved.

On June 3, 2014, clients and friends of First Long Island Investors gathered at the Garden City Hotel to learn more about the economic and social impacts of the NY Islanders moving to Brooklyn and the Nassau Coliseum redevelopment project. Joining First Long Island’s Chairman and CEO, Robert D. Rosenthal, for the discussion was Ed Blumenfeld, the president of Blumenfeld Development Group and a partner in the Coliseum Redevelopment Project, and NY Islanders legend Bobby Nystrom.

Ed Blumenfeld shared with the group some of the plans for the Coliseum and surrounding areas:

• The Coliseum will receive a complete overhaul. The new structure will be a state-of-the-art facility leveraging the newest advances in technology and a redesigned concession area, similar to, but updated from, that of the new Barclay’s center in Brooklyn.
  • Events held at the new facility will include concerts, family affairs (i.e. the circus), college basketball, college hockey, several Islanders games, and more.
  • With no professional sports team dominating the schedule, the new coliseum will be able to schedule college sporting events with more flexibility than arenas like Madison Square Garden and the Barclays Center; thus attracting top teams and match-ups.
  • The footprint of the new coliseum will be smaller, yet in line with other new stadiums being built nationwide. Depending on the event, the venue will hold from 4,000 – 13,000 spectators. The decrease in size will provide sufficient parking without requiring parking structures to be built for this phase of the redevelopment.
• The area surrounding the coliseum is envisioned to be a day and night destination. Some of the businesses under discussion are indoor skydiving, a Dave and Busters and other restaurants, a health and fitness destination facility similar to Chelsea Piers, Island Basketball, and some retail, noting that Roosevelt Field will remain the retail hub in the area.
• There are plans for a sports field on the premises. This field would host high school soccer, lacrosse, and football championships, among other things, and a deal is being negotiated to broadcast these games.
• The current redevelopment work will not include all of the land. Down the road, some of the land will also be used for additional redevelopment by Hofstra University and possibly residential projects.
• The economic impact of the renovated coliseum, and the broader redevelopment, is very positive for Long Island. The sales tax impact will depend on who comes into the space. The current estimates indicate that the redevelopment will yield at least 1,500 – 2,000 new permanent jobs.
• The county administration has been nothing but supportive of the redevelopment efforts in the time since Ed Blumenfeld and Bruce Ratner won the project. This is a shift from past administrations and past Coliseum redevelopment proposals, but one that Ed is quite encouraged by.
• The coliseum redesign and general redevelopment will take approximately 18 months, and the project will start when the Islanders finish their 2014-2015 season. There is collective hope that work on the coliseum redesign can’t begin until July (as the Islanders advance in the playoffs), but the development team will be ready to start in April.

Some of the more speculative conversations centered on the following topics of interest:

• The name of the coliseum is still yet to be determined. There are naming rights, and a number of discussions are currently underway.
• Having a minor league hockey team and/or a D-League basketball team making the new arena their home, with no teams yet finalized.
• The new coliseum will be able to support a major league team, if the Islanders were ever to want to return or if another team wanted to come to Long Island.

Bobby Nystrom provided his personal perspective on the NY Islanders moving to Brooklyn:

• Because the Islanders are a part of Long Island’s fabric, Bobby and other former players are disappointed to see the team go.
• There are numerous ongoing efforts to revitalize various parts of Long Island, and being able to hold on to the team would have benefited some of those projects and Long Island overall.
• Bobby indicated that it will be interesting to watch how the Islanders v. Rangers rivalry, a historically intense rivalry, will take shape with the team in Brooklyn. He recalled a time when the Islanders v. Rangers game was held at the Coliseum, and there was barely an Islander jersey to be found in the stands. That evolved over time, and the concern with a move to Brooklyn is whether the Islander fans who live further out on Long Island will travel to Brooklyn in support of the team.
• Today’s NHL players are more transient due to trades and free agency compared to when he played. Back then, many team members established permanent residences on Long Island and set up businesses here after retiring from hockey.
• Given the age of the coliseum (it’s the second oldest arena in the NHL) and the lack of development in the current surrounding area, free agents have not wanted to come to the Islanders. Hopefully the move to Barclay’s will change that, but only time will tell.
• The information shared thus far with Bobby indicates that the team will still be called the NY Islanders.
• With respect to the future of youth hockey on Long Island without a major league team being here, Bobby felt it could take a hit, but that there are new rinks being built on Long Island and programs being designed to keep children engaged in the sport. The 1980 Islanders Stanley Cup win and the US Olympic team winning the gold medal gave youth hockey on Long Island a huge boost in that decade.

The session closed with Bobby autographing Islander hockey pucks for attendees, giving them yet another positive memory of the NY Islanders run on Long Island.

 

 

Ed Blumenfeld is President, Founder, and the creative force behind Blumenfeld Development Group (“BDG”). Under Mr. Blumenfeld’s direction, BDG has become an industry leading Development firm that specializes in converting underutilized real estate into vibrant, innovative, progressive space that meets the economic and social needs of the community. He is a founding member of the Association for a Better Long Island (ABLI) and was a founding member of the Schneider Children’s Hospital. He has been an ardent supporter of the hospital since its inception and further confirmed his commitment to its continued success by spearheading the expansion of the Hospital campus to include the Blumenfeld Center for Pediatric Medicine. Mr. Blumenfeld has also taken a leadership role in honoring the region’s veterans and active duty military personnel through his philanthropic support of the award winning American Airpower Museum at Republic Airport. Through his many undertakings, Ed Blumenfeld has literally and figuratively built a better Long Island. Mr. Blumenfeld attended Hofstra University, Uniondale, New York.

Bobby Nystrom is a retired professional ice hockey right winger. He played for the New York Islanders from 1972–86. He is best remembered as having scored the winning goal at the 7:11 mark of overtime to give the New York Islanders the 1980 Stanley Cup title. This signaled the first of four straight championships for the club. He was also among the last NHL players to not wear a helmet during a game. Nystrom has been known as one of the all-time clutch players in NHL Stanley Cup playoff history. He tallied 39 goals and 83 points in 157 playoff games; however he is most noted for his knack for sudden death overtime winners. Nystrom ended playoff overtime games four times in his career. Nystrom embraced the Long Island community like few others, contributing to various charities in the area and promoting the local businesses whenever possible. By virtue of these distinctions, and coupled with the most famous goal in team history, Nystrom was nicknamed “Mr. Islander.” The Islanders retired his No. 23 on April 1, 1995. In 2003, he was inducted into the Nassau County Sports Hall of Fame.

First Long Island Investors, LLC (“FLI”), a full service wealth management firm overseeing more than $1.2 billion dollars in assets, is pleased to announce two new hires in its continuing efforts to support FLI’s growing business. Matthew (Matt) Cohen joined as Assistant General Counsel in January of this year and Karen Weiskopf joined as Director of Marketing in March.

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