Our investment philosophy begins with these guiding principles:

• Avoid big losses. They are difficult to recover from. For example, the "tech wreck" of 2000-2002 caused many to lose 70%, 80% even 90% of their money. Eight years later in August 2007, they still had not recovered. Besides their investments, people lose money in business dealings, real estate, options, futures, bad loans, or mindless gambling. You can’t build wealth that way.
• Buy at a fair or bargain price; sell when it's expensive. This is not "market timing." It’s common sense. You don't make big money by buying when things look great! Buying when no one else will is the real secret to making great investments regardless of whether it’s stamps, coins, art, real estate, stocks or bonds. Warren Buffet, the master controls the one and only thing any investor has control of in any investment transaction: the price he pays.
• Compounding is the "royal road to riches." Perhaps the most boring of all investment approaches, it nevertheless works like night follows day. Not only is it boring, but it requires discipline, patience, time, and the ability to save. Compounding requires buying and owning investment items that throw off interest and dividends in order to buy more investment items that throw off interest and dividends. As we said, it's boring, but as the income increases the process becomes more interesting. Eventually, compounding can become rather exciting! Do the math using a compound interest table and see the magic for yourself.

With these guiding principles in mind, we then overlay a series of fundamental and technical studies of the financial markets and the economy that help us get as much value for our dollar as possible given the current climate. We employ a top-down, values oriented approach that includes risk management against systemic financial risks, combined with our global macro view of long-term themes.

Since we believe the pain of a loss "hurts" more than the joy of a gain, we apply an absolute return philosophy. What this means, is that we take an active approach to our investments in order to control risk. This is in contrast to many mutual funds and index funds which stay fully invested all of the time regardless of market conditions. Additionally, we do not use leverage because we are long-term investors and the use of debt can take away your staying power during a market correction.

For us, diversification (or "asset balance" as we call it) means owning a house, T-bills, stocks, collectibles, commodities, municipal bonds, etc., all working in a coordinated & integrated way towards the achievement of your important goals in life. For many Wall Street firms, diversification (relative return investing) means owning a large-cap growth fund, a large-cap value fund, a small cap-growth fund, small-cap value, a bond fund and maybe an international fund. This approach may work when everything is going up such as in the 1990s, but when stocks declined globally in 2000, diversifying stocks with more stocks, makes no sense!

In summary, we believe in being flexible, yet cautious. We keep an open mind and seek opportunities wherever and whenever they exist. We believe the loss of capital is the worst thing for any investor – even those who claim to have a "high risk tolerance." The markets will be there everyday for the rest of our lives. If we miss a move for a few days, weeks, or months that can always be overcome. A huge loss, however, burns precious emotional capital and makes a comeback that much more difficult.

SLOW AND STEADY really does WIN THE RACE.