Our investment philosophy is an eclectic one. We believe that the income and credit method of analyzing an investment (as taught in the lending and bond industries) plus mean reversion analysis is the best way to analyze stocks, real estate, and of course bonds. Income and revenue are fairly reliable, stable metrics (if adjusted for inflation, mergers, one time expenses and averaged over ten years), but balance sheet items are often unreliable and subject to being warped by asset bubbles. This means buying quality companies with stable, growing earnings, low debt and low or moderate 10 year average inflation adjusted P.E. ratios are the key, rather than buying a company that has a hot product or the best balance sheet items such as cash on hand, net worth or attractive assets, as these can quickly be squandered, especially in a sudden bear market crash. We enjoy looking to the big picture global top-down macro economic view to decide what asset class may be best. We believe in diversification. Most importantly we believe in being modest and flexible and not having a stubborn "know-it-all" attitude. We think like a researcher who is open to new ideas that destroy old paradigms. Regarding the “efficient market hypothesis”, that is too impractical to work in the real world; instead in the real world the market most of the time is very inefficient. Individual investors in the aggregate make very emotional and inefficient choices, especially during the tech stock bubble of 2000 and the real estate and mortgage bubble of 2007. Also, the majority of the professionals who work in institutional investing make emotional decisions and cave in to emotional pressure from the masses of investment consumers. A study by Dalbar showed that individual investors made 3% return in the 1990’s when the market returned 17% a year. This was because retail investors were buying at the top and selling at the bottom in response to emotions. Regarding “efficient market hypothesis” there was a study done that showed that mutual funds that had portfolios that were significantly different from an index fund did beat the market; the funds that did not beat the market were “closet indexers” who lost money because their annual fee caused them to lag the market index.
     We believe investment failure is analogous to a pilot who stalls out because he was aiming the airplane up in an excessively steep climb. The proper way to invest is to slowly make gains, rather than seek to make a sudden fast windfall. This is analogous to setting goals to find a low risk investment that will hopefully give an alpha of 2-3% over the market, as opposed to seeking a 10-20% alpha with a high risk investment. Getting a 2% alpha when compounded over many decades with modest capital gains taxes (due to minimal selling) can lead to a significantly higher return than the market.
     Our philosophy is that it is best to own an investment is with no leverage, which means no margin loans, no options, and no futures contracts (with the possible exception of using options to hedge against losses). When investing in commodities it is best to simply buy the companies that make them instead of holding a warehouse full of commodities. When you buy a company you get the wisdom of the employees who decide whether or not to hoard or to produce more commodities; by contrast a warehouse full of copper or oil just sits there with no one thinking for you what to do next, meanwhile the meter is running for the warehouse fees and for the Present Value of money used to invest. For real estate we prefer publicly traded REIT’s with minimal debt (but only when the market value is low enough to justify buying). We prefer to avoid illiquid, non-traded assets such as Limited Partnerships or directly owned real estate. However, if someone already has a proven track record of handling directly owned real estate as the sole owner and his properties are financed with low, stable levels of debt then we are willing to be flexible about that issue. When buying stocks an investor should think like Warren Buffett and take the attitude that “I buy a business, not stocks”, which means that one should not look at fluctuations in share prices but instead look at fundamentals.

* Independent, objective advice is vital to creating the correct investment plan
* Each client should establish and follow a customized Investment Policy Statement
* Maintaining low investment costs is important in order to reach plan goals
* Be aware of obscure annual fees and the cost of mutual fund operating expenses and fund's intangible cost of "trading impacts" in no-load funds that can amount to three percent per year.
* Avoid making investments that are hard to get out of (such as an annuity with a surrender charge, or a limited partnership)
* Avoid making investments in mutual funds with a "Load Fee"
* Avoid seduction and manipulation by marketplace hype and hysteria
* Do not talk to friends or coworkers about investments or economy if the conversion degenerates into an attitude of following the herd
* Do not read the general media about economy or investments, instead read scholarly journals and books
* Avoid listening to sound bites offered by broadcast media, instead read scholarly media
* Clients need to work with an experienced, mature, dedicated fee-only financial advisor with credentials such as a CFP® certificate
* Think creatively, objectively and independently from the popular mythology of the general public
* Recognize major structural changes in the economy before others do
* Be aware of how crowd psychology brainwashes investors to make bad decisions
* ETF’s don’t work as intended except for a few very large equity funds, and very liquid with broad market base.
* ETN’s, especially inverse (short selling) funds are very risky and don’t work as intended
* There are fundamental reasons why P.E. ratios should be at or below 15 (for a ten year inflation adjusted average) and if it is over 15 take defensive measures.
* The true history of the market is masked by inflation and by one-time non-recurring gains, thus the true total return of the equities market is not nearly as good as it appears
* Investing in illiquid investments that have large minimum investment amounts may produce a better return than publicly traded securities, however, this is too risky and too hard to verify to recommend

* Avoid exotic hedge fund strategies with derivatives, instead buy something that is straightforward and clearly understood with no leverage
* Investing properly requires plenty of liquidity or other staying power for emergencies so as to avoid selling your investments when you need to spend money.
* Investing properly requires tax planning

* Tax planning for investments is trumped by the actual non-tax merits of the investment
* Investing properly requires cutting the costs of broker's commissions, mutual fund fees, etc.
* If buying investment real estate (non-owner occupied) avoid a negative (before-tax) cash flow and assume that you will be stuck with the property for seven years; however, we recommend that investment real estate only be purchased by owning shares of publicly traded REIT’s and only when the price is low enough
* Success in financial planning comes from saving and avoiding losses rather than finding a miracle way to "beat the market"
* Survival is the only path to riches (so avoid excessive or hidden risk)
* Do not assume patented technology products produce consistent, sustainable profits for stockholders
* Stock options issued to employees need to be expensed to have an accurate financial statement for publicly traded company that issued them.
* Diversify your investments
* Boring investments are good/exotic ones are dubious
* Do not trade frequently, instead buy and hold; however, be alert for and willing to sell off overpriced investments during a bubble
* Do not watch the market during trading hours, instead learn fundamental analysis and ponder key structural economic problems that others are unaware of.