Fire Drill - Weekly Blog # 782

 

Mike Lipper’s Monday Morning Musings

Fire Drill:

On board ships and in schools, why not in investing?

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 

 

Any Smoke?

Implications: US stock index returns are almost normal for the full year if we use the year-to-date performance of the Dow Jones Industrial Average +7.16% and the S&P 500 +8.14%. Even the NASDAQ +18.64% is representative of a good speculative year, perhaps benefitting from short covering. The VIX indicator is almost asleep at 15.76, compared to 30 in past mildly troubling times.

 

There are some whiffs of smoke in the air, including a continuing 2 to 10-year yield inversion spread of 4.08% - 3.45%. Updating one of the oldest technical indicators with a more modern twist. In the latest week the 30-stock DJIA had 20 stocks rising to 10 declining, but the 20 transports split 6/14. (In the original Dow Theory, it was only the rails in the index. Today the number of rails has dropped, and a number of airlines, trucks, and other transportation securities have been added.) This could be significant if the normal buyers of rails, which are freight driven, are looking for future declines. 

Another group that appears to be worried are the CEOs of traditional financial services companies. The latest to announce a 10% layoff from both their investment banking and investment management functions was Lazard. (Mid-market M&A industry revenues hit a 9-year low in the first quarter.)

 

Publishers Note

The popular distinction between a recession and a depression is your neighbor losing his job in a recession and you losing yours in a depression. It can be helpful to explore the possible roads to a depression by focusing on the needs of securities analysts regarding layoffs. In focusing on the way companies handle layoffs, they should first be aware of the lost art of making money from bankruptcies. All too often layoffs are the first act of self-inflicted worsening conditions. Since they don’t teach about surviving bankruptcies today, they are unequipped to adequately analyze layoffs. (I admit the thought came to me in a recent meeting with the Dean of an upcoming Business School, where there are no classes on bankruptcies.) 

While a Columbia College undergraduate I was privileged to take Securities Analysis from Professor David Dodd, who was both an academic and investment partner with Benjamin Graham. David Dodd collaborated in producing the seminal work on Securities Analysis based on their experiences in the 1920s and 30s. It occurred to me that the whole basis for the course was the knowledge necessary for those who’d lived through the depression. This knowledge could be important in the coming era, and I will consequently devote the rest of this blog to the types of things one should look for prior to and during such a period.

 

The Fixed Income World is Different

There are two critical differences between fixed income and equity.

1. The first is the legal relationship. Fixed income is a contractual relationship with an initial investment, periodic payments, maturity, and rank in the order of payments in a bankruptcy.
2. Owners of fixed income securities are expected to be paid a pre-determined amount of interest and pre-payments of principal, as well as a final payment.

If payments are not delivered as promised, the default process is governed by the issuing documents. Things change dramatically when a bankruptcy begins. All debts immediately come due, sourced from the potential sale of all assets. Debts are paid in priority order, as specified in the issuing documents.

 

However, compromises are often made to get agreement from the holders of different classes of claims. This helps expedite payments rather than having to endure long, expensive court hearings. The size of the payments is a function of the price paid for the assets, less the costs of the sale. The cost of the sale includes the cost of highly specialized attorneys, accountants, and other experts.

 

Fixed income securities rights and privileges are senior to common stock rights. Owners of common stock will probably be wiped out, as there is generally no additional money to pay out after the senior debt holders have been paid. However, to avoid long and expensive court battles by equity owners, they will often be awarded a small amount of a subsequent new equity class.

 

What is a Bankruptcy Worth

Up to this time the focus has been on the current appraised value, usually in a quick liquidation. To the extent there is a belief that a “going concern” will survive bankruptcy, a different kind of analysis is needed based on the current use of the assets and their user in the future.

 

Growing up in Manhattan there were neighborhood cigar stores on many commercial street corners. They were good business in the late 1920s and became less good as time went on. By the early 1940s those businesses had effectively died. A chain of these went bankrupt, but their stock went up in price!!! The reason for this was that these stores were on busy corners and had long-term leases. A classic case of being worth more dead than alive.

 

There were a couple of cases of railroads who lost lots of money throughout the depression and went bankrupt. However, a couple of sharp investors saw a similar situation, as the railroads had considerable land along their right-of-way. In the WWII expansion of plants and military camps, these lands and their proximity to the rails became very valuable.

 

The unfortunate attitude of too many of today’s analysts and portfolio managers is that “value” is found on the published financial statements. To them, stock selling at a discount to book value is a bargain. In truth, book value is a collection of unamortized assets not written off. Because of changes in the market for a company’s products, the use of their facilities is less than their original purpose. For example, strip shopping malls in poor locations today.

 

What is not reflected in the financial reports are the developed new products, self-generated patents, a good sales force, key employees, etc. These are the types of assets we look for as investments.

 

The items mentioned in the last paragraph are critical in evaluating various layoffs. To the extent the layoff managers husband these types of assets I am not concerned, but if they are shedding valuable assets I am.

 

 

How Do You Evaluate Layoffs of Owned Stocks?

 

 

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Chinese Emperors Learn “All Roads Lead to Rome” - Weekly Blog # 587

Mike Lipper’s Monday Morning Musings

Chinese Emperors Learn “All Roads Lead to Rome”

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018 –

Before focusing on the underlying geopolitical/economic elements in our current tensions, we should focus on the immediate signals highlighted below:

1. As of this week seven of the twenty-one US Diversified Equity funds averages and five narrower sector fund averages have gained more than +20%, including the average S&P 500 fund.  Years ago, a manager of a corporate defined benefit pension plan with an excellent long-term record had a tactical rule. In any year that he was up 20% he went to cash. This was not a market timing maneuver, he believed that earning two to three times his actuarial assumption was enough in any year. It didn’t warrant taking any additional market risk in that year. There would always be opportunities the next year, particularly if there was a flow of new money. Some investors should follow this approach with their equity investments today.
2. Many so-called balanced funds or accounts don’t like high quality bonds. What they are holding in their fixed income allocation is meant to cushion a fall in a declining equity market. However, their fixed income allocations have assumed considerable equity type risks in currencies, high yield, or credits with very light covenants. This is particularly worrisome when the proceeds of these issues are used for increased leverage, without any substantial new earnings power being generated. Thus, many portfolios marketed as conservative investments have more than stock price risks embedded in them. Michael Cembalist of JP Morgan Asset Management is particularly concerned about leveraged loans, which are 95% covenant lite in Europe.
3. Are we approaching a time where a radical change in thinking about future trends is required? Typically, many financial and economic organizations publish their mid to long-term forecasts over the next three months. They include forecasts on domestic and global GDP, rates of inflation, interest rates, market concentration and favored industries/individual securities. They are produced by learned individuals or teams and are based on the continuation of present trends. In other words, their forecasts are like the US Fed, “data dependent”. Odds are, many of these forecasts will be right in their extrapolations, with relatively low payoffs. They run the risk of a “Minsky Moment” after a long period of stable results. (A Minsky moment refers to a sharp decline in prevailing market sentiment and economic productivity after a long period of widespread optimism). I think we are due for such an occurrence, particularly in organizations headed by long successful leaders close to their last hurrah. Remember the planner’s curse, “Men plan and God laughs”. Looking at the composition of the Dow Jones Industrial Average, not one of the thirty names is from the original list. Even the S&P 500 index funds have annual turnover due to acquisitions or lost market capitalization. I suspect we are due for a series of unexpected surprises, suggesting that after the 2019 gains we should be willing to build opportunity reserves, not market timing reserves. A future blog will address market timing issues more fully.

“All Roads Lead to Rome” - What Chinese Emperors Learned
The critical lessons of geopolitics and their accompanying economics are driving our two modern emperors today, the leaders of China and the US. The first era they should recognize is ancient Rome, which turned the Mediterranean into a Roman lake. Their power did not rest solely on the strength of the Roman legions, but more importantly on the success of their engineers in building roads and water viaducts. These were critical in supplying their capital center with imports of grain and captured slaves.

Over the centuries the Mediterranean held the keys to other powers. It was the last leg in the importation of spices and other materials from the “silk road” to Italian City states. The 15th century Europeans realized the nautical/military power of the Chinese when their armed junks entered the old Roman lake. (Due to a sharp change in the attitude of the Chinese government, which recalled all of their navy and destroyed their ships, their Navy was largely destroyed). Soon thereafter the Dutch replaced the Portuguese as the suppliers to Europe for much of what used to come overland. The Dutch East India Company (English translation of BOR) built a fortified base in Indonesia and controlled the South China Sea and much of the Gulf of India.

These strategic lessons were not lost on the Germans. They believed that whoever controlled “The World Island” (EuroAsia including Africa) controlled the world. The US view was enunciated by Admiral Alfred Thayer Mahan. (When I first read his views at Columbia I did not realize that he had spent two years there before going to the Naval Academy.) His basic view was that he who controls the seas, main islands and critical ports, controlled the world. He was particularly sensitive to “property” between 30 and 40 degrees latitude.

Underlying tension between the US and China today
I have always believed the tariff issues with China and other countries were a way to get vital national securities issues on the table. Going back to the roads of Rome, it’s apparent an empire is vitally dependent upon imports of critical supplies. (To some degree imports are dependent upon the combination of capital transfers and money earned from exports.) Unlike the US, China is much more dependent upon the import of energy, very high-quality semiconductors, and similar items, many of which are imported through the South China Sea and related bodies of water. China feels that it is a national imperative to control access to their country. Even with a fully developed “one belt, one road”, the land route is insufficient. Officially, the US is for the international right of free navigation of all major water routes. Like the Soviet Union, China wants to escape encirclement. China recognizes that at some point it may have to fight its way out of a perceived trap. In the modern world one of the weapons of choice is technology, particularly advanced semiconductors. Both sides recognize that they have attractive internal markets for other’s goods, as well as capital that can be used for their own imports. 

Investment Conclusions
We should learn from both boxers and wrestlers. In terms of tactical investment decisions, be a counter puncher looking for the rare opportunity, but as a wrestler stay engaged and use the opponent’s weight as leverage at critical points. Bottom-line looking ahead, after investing focus on up-to-date strategies, successful investing.


   
Did you miss my past few blogs? Click one of the links below to read.

https://mikelipper.blogspot.com/2019/07/apollo-11-investment-lessons-weekly.html

https://mikelipper.blogspot.com/2019/07/us-stock-markets-new-highs-misleading.html

https://mikelipper.blogspot.com/2019/07/twin-problems-not-enough-greed-and-too.html



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Not Yet a Peak & Luck Lessons - Weekly Blog # 572

Mike Lipper’s Monday Morning Musings

Not Yet a Peak & Luck Lessons

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018 –

       

Absolute price tops and bottoms rarely occur. Most of the time market prices fluctuate without creating important turning points. Comments about investment markets are mainly focused on earnings and related valuations and these have not recently been helpful as guides to making investment decisions. In their place some are relying on various statistical measures of investors’ sentiments and the current somewhat bullish indicators are not generating a lot of enthusiasm. There is something absent from the picture. The stock market has been moving up for three and half months, but the volume on the New York Stock Exchange in 2019 is down -4.68%. An even better measure of short-term speculation, the NASDAQ composite, is up + 1.31%. Some short-term traders may be concerned that in March the three major stock indices had a gap in their price charts. Many market analysts believe that gaps need to be filled before a price trend can be relied upon. While no forecasting measure is ever 100% accurate all the time, I believe we have not yet reached a peak level.

Sports World Experience

One should pay attention to the importance of luck, especially in light of Tiger Woods winning “The Masters” golf championship this weekend. A remarkable comeback for him considering his physical and personal problems. Not taking anything away from the winner, but a couple of golfers that were ahead of him ran into some poor luck with a few of their strokes. In my basic investment analysis course at the racetrack I would call this “racing luck”. To me the most useful analytical time at the track is the twenty to thirty-minute period between races. This is the time during which I compare the results of the prior race against those predicted by my handicapping analysis. Most often, with the benefit of hindsight, one can find in the records of past races the reason the results turned out as they did. In the minority of instances, when the results could not have been predicted, it was the result of the record being incomplete or the result of unanticipated “racing luck”.

My Lucky Experiences

I have had two experiences that had nothing to do with my securities analysis training and certainly was not tested in my CFA exams. I would call these examples of racing luck.  

• As a result of following closed-end funds I owned a few shares of an Eaton Vance fund who had a relationship with Winrock, the venture capital arm of the Rockefellers. They had a share interest in some of their holdings and for regulatory reasons needed to terminate it, resulting in the closed-end fund distributing ownership of those shares to its shareholders. Consequently, I own a few shares of Apple at under $1 apiece. (At some point in the distant past I sold half the position because I had enough losses in other securities to offset the large gain in Apple. VERY DUMB MOVE to let taxes dictate an investment decision, an important lesson.)

• Many years ago I took out a life insurance policy and later realized that unless I passed prematurely it was a bad use of money. The rate of return the insurance company needed to meet its obligation was low relative to what it was earning on its investments. Thus, I bought some shares in the insurance company to take advantage of the spread and the float in the investment account. As a result, I would have a sales force working for me to find others that did not fully understand the economics of insurance. This is a lessoned not taught at Columbia. Over the years the insurance company did well but was never a high-flying stock. Recently it was bought out for cash and stock, the cash being many multiplies of my cost. Thus, I am more than satisfied. The stock is CVS Health, which I currently hold. I don’t generally directly invest in the health care industry, but let my choice of specialty and diversified mutual funds give me exposure. Barron’s recently had a cover story titled “CVS This could be the future of healthcare. Time to Buy”.  According to the article it is selling at an 8 P/E and a yield of 3.79%, which is in the range of the insurance stock I bought years ago.

Lessons

1. As indicated, don’t let taxes alone drive investment decisions. Sell when there is a better use for the money.
2. One needs to be invested to allow good luck to happen to one’s money. If I had to buy them independently, I probably would not have owned these winners.
3. Over long periods of time, investing in a portfolio of equities works better than trying to time the market
4. Cash reserves are appropriate to meet expected payments and for use as a possible opportunity reserve.

Questions of the Week:

1. What is the range of your opportunity reserve?
2. How long should you keep the reserve if you can’t find a commitment?

  

Did you miss my past few blogs? Click one of the links below to read.

https://mikelipper.blogspot.com/2019/04/investing-in-quality-for-growth-or.html

https://mikelipper.blogspot.com/2019/03/investment-committee-and-investors-be.html

https://mikelipper.blogspot.com/2019/03/the-actively-worrying-classpassively.html

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Value Investing: Yes, Book Value: No

Introduction

Two thoughts to begin this post:

1.  Value focused investing has produced good results for hundreds of years.

2.  The use of unadjusted book value found in the modern corporate accounting statements can mislead the value investor.

Investment See-Saw

With our need to label anything that moves, particularly in the stock market, during rising markets we often divide companies, stocks, and fund portfolios into either growth or value. With the power of computers to sort and mislead, many foolishly believe that there are some statistical divining rods that can separate growth from value. In truth almost every entity has alternating periods when it can be recognized as either growth or value.

The Perceived “Two Number” Screens

As a life long student of investing I have noted that growth investing is essentially time-focused arbitrage. The growth investor has reasons to believe that in a particular future the price of the shares of interest will be materially higher than today’s price. Growth investors are essentially forecasters. In a secular rising market (as experienced by US investors) the trend is their friend until it periodically disappoints.

Value investors see the future as a range of outcomes, only some of which are identifiable. Charlie Munger is the epitome of rational investing. He and his partner Warren Buffett have three baskets, In, Out, and Too Tough. Jason Zweig quotes Charlie invoking Confucius, who said that real knowledge is knowing the extent of one’s ignorance.”

Dangers of “Latest Published Book Value”

Far too many professional investors start their search with a screen of current prices compared with the latest published book value. I would suggest they are taking an easy and faulty crutch to find value. One of the many things drummed into me by Professor David Dodd of Graham and Dodd fame was never to accept the validity of a balance sheet as presented. Balance sheets then and now are important initial file instruments for the credit world. The initial bottom line for credit work is book value. This is a calculation derived from taking all the liabilities on the balance sheet from the total of all assets also shown. For investors in stocks and bonds priced way below par or maturity value, Dodd would term book value, unadjusted as “rubbish.” The good professor was not just a learned academic at Columbia University, he was also an investor and partner with Ben Graham* in a very successful investment partnership.

The Lessons Not Learned

On my recent trip to visit investment managers in London I came across at least two instances where they could have profited from Professor Dodd’s classes. In the first case a sizeable, successful group invested in closed-end discounts from the fund’s current net asset value (equivalent to book value for funds), large family dominated non-US financial entities, and other conglomerates. I have been an analyst of bear raids on US closed-end funds selling at significant discounts. These “operations” rarely work out in practice compared to what they should do in theory.

All published net asset values for funds are based on the closing price of the individual holdings on statement date. Market operators are well-conscious of important stated dates and may adjust their closing prices accordingly. If the fund has particular positions in somewhat illiquid stocks the price to liquidate the positions will likely be anything other than the last price in the NAV. Also the unwinding of the raided investment advisor’s management company can prove to be expensive in terms of settling leases and termination payments. Further, to force a liquidation of a closed-end fund an initial investment needs to be taken and it is at risk for the difference between the purchase price and the liquidation proceeds in the future when the market could move materially. At times, hedging this risk can be expensive. As faulty as raiding a closed-end is, the rest of this portfolio is at risk for using book value as an important measure.

I was one of the very few analysts who in the 1960s spent a great deal of time following multi-industry companies. These were soon called conglomerates, somewhat forgetting that General Electric and other industrial companies were producing products for a wide range of business customers. One of the reasons I was attracted to these companies is that there were many fewer analysts following them and thus they were not highly valued.

One of the sales pitches to convince institutional investors to buy these stocks was to show that there was a substantial discount from the value of each of the major parts of the conglomerates. It was a good sales approach, but I can not remember a single conglomerate that liquidated itself by selling off all of its parts. Yet this is the very same approach that was being used by this London manager. Further, as I knew a little bit about some of the financial operating holdings, I questioned whether book value was reflective of a liquidating value.

In one case, the financial operation was one of a handful of major players in a somewhat restricted market. I raised the question as to whether the local government would permit its sale to a foreign entity. Having recently visited this particular headquarters, I asked whether a very extensive art collection was in the book value calculation. (There is at least one important US group with a similar art collection.)  The conversation then pivoted to their treasures, we did not even get into the expected size of retention packages for key personnel or any guess as to the proportion of revenues that could be lost if the founding family was no longer involved.

On a second London visit, to one of the great names in the global financial world, we were going over its balance sheet and other financials. It was pointed out to me that the monetary value of the firm’s great name was not included. I raised the question whether or not they could get an external appraisal as to the value to the name, which my hosts never considered. As someone who has a globally recognized name in various financial communities, I am aware that a well-known name helps in getting the first introduction. But from that point on it is what one is presenting that will determine what is bought. Thus, the value of a name is a bit ephemeral, but I believe it still can be measured.

The interesting thing coming out of this type of exercise is that for internal purposes the value of the brand would have been added to its assets and perhaps materially. If that was the case, the return on assets and return on investment could well show that the present management was not really earning its keep.

What to do Now?

As we do not know which type of investing will do the best for any particular period, in our portfolio practice we own both growth and value focused mutual funds for our accounts. Over long periods of time the survivors of these two schools of investing produced similar results, but quite different in shorter periods. On a year-to-date basis in each market capitalization size category, value funds have underperformed growth funds. In a somewhat extreme example, through the 24th of September, the average Large-Cap Growth fund is barely down -0.36% as compared with the average Large-Cap Value fund falling -8.57% as measured by my old firm. As a long-term contrarian investor I note that the spread is unusually large and could prove to be attractive in the next cycle. 

* I was very honored when the New York Society of Security Analysts awarded me the Benjamin Graham Award, my old Professor might not have believed it.

Question of the Week: What measures do you use to find value?
 _________   
 
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Roles in Life Rule Investment Decisions

Introduction

In studying investment managers for more than fifty years, I have learned that the roles that they have played through their lives have had an enormous influence on how they invest. What is true for the professional managers is also true for individual investors. If that is my thesis, I should apply it to myself. Thus, the following will be a form of self-analysis. The purpose of this exercise is to suggest that others should examine what in their personal history influences them as investors. Our life roles and experiences go a long way in explaining our self-imposed constraints and proclivities.

Handicapping Thoroughbred Racing


I have probably learned more about analytical thinking and careful money management from my experience at the New York race tracks than from all the classes I took at Columbia or in earning a CFA designation.

The first thing I learned was the existence of "racing luck". Despite a great deal of time and energy spent on past performance data, unaccounted things can and do happen. Thus the weight of money odds always includes the betting market's views on uncertainty or racing luck. The second thing I observed was that the betting crowd can be wrong. The most popular bet wins less than half the time and in many cases more like a third of the time. Thus, I usually have an aversion to investing in the most popular stocks or funds. The third thing I learned was that there was a better way to handle my hard-earned money.

One aspect of the first lesson mentioned above is not to feel compelled to participate in every race and to pick my opportunities. As an investor this has probably led me to favor funds that have fewer rather than a larger number of stocks. The second part of my track-induced money management course was to look for opportunities where the probabilities based on my thinking were different than the odds offered. Often I would bet on my choice for second (Place) so if my horse did come in either first or second I could still cash a ticket. Often if the favorite did not make it up to the wire at the end, when my horse did, the payoff for Place was substantial. 

Investment Lesson: Bargains are hard to discover at the track and in the market but are worth the time and effort to find.

Collegiate Fencer

As a five foot nine inch champion team member I was assigned to fencing épée. The bulk of my opponents were considerably larger than me, well into the six foot level.

Investment Lesson: I learned not to be overly concerned about being small. 

The bigger the foes, the harder they fall.

An Officer in the US Marine Corps

Here there are three lessons I learned from the USMC:

1.    Tight discipline produces first-rate results.

2.    The best defense is a good offense.

3.    Taking care of your troops and listening carefully to their reports often leads to them having the answers to difficult problems because their practical experience is far superior to field manuals of instructions.

Investment Lesson: A disciplined approach to investing is vital.
   

Simply avoiding large losses is not enough; one needs to make money to deliver against the needs of the account. Be aware one does not have to have all the answers. Many smart moves come from those with less theoretical, but more practical experience. However, one needs to take command of difficult situations even when you lack enough information.

Securities Analyst

A single financial statement in and of itself is relatively useless. Early in the game of analysis we learned to compare one company against the other, usually by numerical comparisons. The next step was to compare to price. On a statistical basis one security is cheaper than the other. This is unfortunately where a lot of analysts and investors stop. Cheaper does not always equal better. Often there are other factors including qualitative items that the market values higher than a pure statistical measure. At times a premium price is warranted.

Investment Lesson:  While numbers are very important, they are not everything.

Entrepreneur

I believe I have a tremendous advantage over many other CFAs and analysts. I started a business. At times I turned around failing products. I met a payroll and paid employees and suppliers as well as corporate taxes. Too many armchair analysts tell corporations what they should do while they themselves have never done it. Today most corporate managers do a pretty good job on what they believe to be the objective. In analyzing a company in addition to its sheer survival, one needs to understand what management believes is the objective. All too often history has shown that professional analysts make lousy business leaders. 

Investment Lesson: We should be respectful of the specific competence required in securities analysis, in business and in non-profit organization management.   

Business Consultant

Because my firm produced the most complete data on mutual funds, and to some degree on brokerage firms, I was frequently asked to consult with CEOs of various fund and other financial organizations. The real world problem was that the statistical or ‘school solution’ answer to the presenting question could not be executed for a host of reasons. The challenge just as in the Marine Corps was, “When blocked, how to go around the enemy and /or improvise with new and often on the spot solutions?” The more consulting jobs I completed, the more I came to the conclusion that the real problem was people and how they acted or will act under change of circumstances. Often the biggest problems were the CEOs who hired me; even when they recognized that they were part of the problem.

Investment Lesson: As investors: we are the biggest hurdle to better performance.  

Understanding and overcoming these limitations may be key to this exercise.  For example, I often harbor a reluctance to sell when short-term disappointment is likely. The short-term can turn into long-term, with the possible result a long period of under-performance.


Investment Manager

By the time one gets the responsibility of managing large amounts of other people's money, one should know exactly how to construct the portfolios for optimum results. Even with so-called discretionary accounts there are specified constraints and unspecified constraints. The latter is what I call the wrinkled nose syndrome. When discussing an investment or a strategy with a client or a high influencer, the nose or some other non-verbal feature indicates a weariness or disappointment.

Investment Lesson: At this point an alert manager should recognize the flashing caution light. The manager can proceed at his/her own risk, but if the particular investment strategy or single investment does not work, the manager has entered the regions of career risk.

Trustee

For those of us who have been something of a success in the investment and other businesses and want to give back to a generous society more than just cash; donating time and effort come to mind. One is often asked to become a trustee of a non-profit organization. Thus, from time to time I find myself in the position of wrinkling my nose due to perceived incomplete research. With no ‘spare time’ to speak of, I usually must decline.

Investment Lesson:  You must be as careful investing your time as you are with your capital.  

At the same time I am empathetic with the managers and their staffs who are trying to deliver expected results while staying within the specified and unspecified guide lines.

In summation

I have performed all of these roles and they have significantly influenced my investment decisions. Through this exercise I am coming to a better understanding as to what makes me tick as an investor. Perhaps each of the readers of this blog could benefit from such an exercise. Let me know what you have revealed to yourself about the impact of the roles that you have played.

_______________________

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