Partnership

I work closely with individual investors to develop investment plans that are right for them. It is a professional partnership based on mutual gain, requiring both effort and commitment. My personal contact with all my clients is not just professional; it is also enjoyable, and this is the basis on which trust can begin to grow. Life is too short for it not to be enjoyable, and I am just as selective of my clients as they are of me.

I do not try to make a mystique of my knowledge. I seek to clarify and make my clients knowledgeable about my field and the decisions I help them make. I try to simplify the issues at hand rather than obscure them, so that they can make as objective a decision as possible.

Flexibility

There are many basic philosophies that come under the umbrella of investing in the financial markets: fundamental, technical, contrary opinion and random walk (indexing). There are many styles of investing: short term trading, value investing, momentum investing, mechanical trading, buy and hold, and so on.

I believe in keeping an open mind and my thinking fluid. In this complex, ever-changing world one cannot define investment failings and opportunities with any one catchall philosophy or strategy. To do so is to miss out on the merit of alternative approaches. Much of the world has its defenses up to keep out new ideas. The only constant in my investment philosophy is that it changes, it becomes more encompassing with the progression of ideas. A lot of investing calls for entrepreneurial judgment on the ideas and progress of others. We make too much of a mystery of the future. Ideas put into execution are the future. Progress, in my opinion, is nothing more than a succession of ideas put into effect and piled one on top of the other.

Trends

Asset allocation and diversification are important components of any life-cycle investment strategy. It makes sense not to put all your eggs into one basket. Too often, people are either under-diversified or over-diversified. Over-diversification leads to an inevitable regress toward the mean, which is to under-perform the market. This is a common problem faced by those who invest exclusively in mutual funds. It also makes sense to allocate resources into different asset classes to immunize against the effect of adverse market conditions in any one-asset class.

Bonds and Fixed Income investing are a very important component of my investment strategy in the current market environment. Too many asset allocation models, however, are based on accurately compiled historic statistics that are linearly skewed toward conditions in the past--such as political and demographic conditions--that are unlikely to prevail in the immediate future. You can't use only your rear-view mirror to drive into the future, you've got to keep your eye on the bigger picture seen through the front windshield for clues as to real trends, curves and dangers. You must always watch the investment climate.

I believe that as long as you have a commitment, a reasonable ongoing methodology that respects the laws of probability, you can make money with just about any investment style in any kind of market. You must, however, have the personality and resources that are compatible with that style of investing. I neither like nor recommend penny stocks, but I have worked with one investing client for many years who has made a fortune exclusively in penny stocks.

Risk

I personally hate risk. I don't gamble. I like to strongly cushion all portfolios with bonds and high-yielding instruments, then look for business risk in the equity markets. I like to use risk as a timing mechanism to ratchet up returns. Timing is everything. I buy low price risk, I sell high price risk when I have found another much more compelling low price risk opportunity. I am rarely out at the top, or even close to the top. I am often in at the bottom, or close to the bottom. I take very carefully calculated risks. There is no such thing as return without risk.

The financial markets are auction markets where the three variables of risk must always be weighed objectively. The three variables are price risk, time risk, and information risk. When information risk is very low, price risk tends to be very high. When price risk is the highest, there is frequently major downside risk. I hate major downside risk. I much prefer to assume information risk or time risk, as often the downside risk is measurable, minimal and acceptable. I am not strictly a value investor. Strictly value investors tend to have a misguided notion of time and of the value of research and innovation. I don't run either a casino or a mutual fund. Let me say this about what I consider business risk in equities: I rarely take a position unless I see a potential 50% to 100% return within 1 to 2 years with acceptable downside risk.

Strategy

Most people base their investment decisions on their emotions and the opinions of professional analysts. They then justify their decisions using fact and logic.

My methodology and approach to investment is quite the opposite. I use the logic of the computer to screen for me both fundamentally and technically. I then use contrary dialectics on current emotions and opinions, and what it would take in the future for the market to come around to my point of view. I do not talk to CEO's, I rarely do any of my own fundamental research or economic research. I rely on professionals whose research methodology I respect and buy, but whose conclusions I might not necessarily agree with. I do nearly all of my own quantitative massaging of data and technical analysis. Most importantly, I always do my own thinking.

 
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