Q&A

Q: When did you first become interested in the world of finance? Can you trace this passion back to your childhood?

A: My father worked with a stockbroker when I was growing up in Seattle, and I remember asking my father about investing.

I majored in business in college. I started funding a retirement account and began to get interested in investments. I opened a brokerage account when I went to work with Ralston Purina in Eugene with someone about my age. After a couple of years, I thought I’d like to do it for a living. I moved back to Seattle, where I was from, and I had multiple job offers in the brokerage business.

Q: You began working in the financial services field in 1985, spending five years with a large brokerage firm in Bellevue, Washington. What kinds of problems did you observe in the commission-oriented structure there?

A: I felt management was focused on revenue for the firm rather than what was best for the client. Office managers asked about revenue generation frequently but never about client account returns.

Q: Can you talk about the differences between aggressive and conservative approaches to investment?

A: Most clients as they get older acquire more wealth and gradually become more conservative. Most people want to be aggressive after the market has increased in value. Then they go through a bear market. They can have portions of their account in more aggressive and some in more moderate investments. The market goes through up and down cycles. Sectors do the same.

Most business accounts are conservative—trying to capture somewhat greater gains than they can get at a bank but not getting into huge risk.

Q: What do you think are the most important concepts for investors to understand?

A: Knowing their own returns on a risk adjustment—understanding what is a good rate of return (ROR) on their investments. New clients often cannot quantify the ROR on their previous investments, nor have they compared their personal ROR to the market.

Q: What can investors learn by studying patterns in economic history?

A: Tech stocks dominated in the late nineties, then crashed and underperformed. The market changes. Upward trends do not last forever, nor do downward trends. In 2007 and 2008, energy dominated. Recently, there has been a flurry of gold activity.

Q: How do you distinguish a slowdown from a recession?

A: There was a slowdown in May 2010. Rail freight traffic, manufacturing data, retail sales, consumer spending, productivity changes, and forums where CEOs speak and give thoughts on the future outlook of their businesses are all important pieces of information to consider when assessing the general state of the economy.

Q: Addressing the economic downturn in 2008, you wrote in one of your newsletters, “Catchy bad news reports sell more newspapers and draw in more TV viewers than more contemplative pieces.” This observation about the media’s tendency to overstate economic weaknesses while failing to acknowledge the strengths begs the question, Does this kind of doomsday journalism have a negative impact on the economy?

A: The media tends to focus on fear aspects more than positive aspects of the economy, It influences behavior in some investors. More seasoned or wealthier clients look for value in downturns.

Q: Which print and online publications do you read and sources do you consult to stay on the pulse of the economy?

A: Wall Street Journal, The Economist—this one’s a favorite since it offers a global view. I also like Barron’s—it’s actionable and offers investment ideas. I read a variety of research pieces tuned to advisors. These have high subscription prices—Morningstar Office, for instance, is $5,000/year. Daily Graphs is $1,000/year. I also read Value Line, AdvisorIntelligence, and quite a few others.

Q: You are member of the Medford Rogue Rotary Club’s Foundation Board and president of the University Club. Can you give some examples of how these organizations help the local community?

A: Rotary Scholarships help lower and lower middle class go to school. They’re about $45,000/year and are mostly general, although some have more specific criteria.

Rotary also funds the Group Study Exchange—GSE—in which international business people come visit the district from Eugene to Yreka for four to five weeks. They stay with members and meet with colleagues and businesses related to their field.

The University Club recently started a scholarship program with the help of local principals. They also help with the renovation and upkeep of a large building downtown.

Q: You’re an avid outdoorsman and an award-winning fly fisherman. What are some of your favorite outdoors activities, and what lessons can you draw from the natural world about investing?

A: I’m part of a group called The Yellowstone Gang, and our goal is to fish all of the best rivers of the West before we’re too old to do so. (laughs) Every summer, we travel to a different spot in Montana, Idaho, Wyoming, Oregon, Washington, California, Alaska, British Columbia, or Alberta, and we keep a record of our travels online.

I was in the Boy Scouts growing up. We’d go to snow caves and take weeklong lake and fishing trips. And then do occasional outings like fowl hunting.

As for what lessons I take from the natural world for investing, I’d say relating to clients, being able to put myself in their shoes. I have a realistic handle on their particular goals. And I try to make socially conscious investments whenever they don’t underperform the broad market.