by Jeff Lokken on October 5, 2011
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When I was a kid, my Dad would load my dinner plate with food and not let me leave the table until I ate everything. If I tried to convince him that I had enough and did not want to eat more, he would explain that I was lucky to have a plate full of food. His explanation was always the same. When he grew up in the Great Depression, he wasn’t so lucky. Frankly, at the time milk mush, and for the record, it’s awful! Milk mush is a flour and water concoction mixed up with a little oats and, if you’re really lucky, sugar and/ or cinnamon. After a bowl of milk mush, I started to get the point. I will admit, it did serve the purpose of giving the feeling of being full. Since I really didn’t want to eat milk mush again I was much more cooperative at the dinner table.
When I was about 12 years old, my
Dad decided it was time to expand my understanding of the Depression. He pulled out an old ledger book from the cupboard and opened it to a page that he had dog-eared. He explained that this ledger was from his Dad’s grocery store. I can’t recall the year, but it was during the Depression. He had me
read the page: … one chicken, two pickles, potatoes … and after each item was its price. I remember thinking, “How could a chicken cost only eight cents?” Also on that page, by the food entry, was a family name. My Dad explained to this clueless 12-year-old that this ledger was for families who had no food or money, and my Grandpa would let them charge food knowing that he had little to no chance of ever getting paid.
To my Dad the Depression was always yesterday, and I am sure he really wanted me to understand his Managing Manias experience of growing up during those times. But as the years passed, I began to realize that his seeming obsession with this time period was an even more important lesson of gratitude and generosity.
The same year that my Dad showed me the ledger, I had a Physical Education teacher, Mr. Schmitt, who also was a starter on the local university basketball team. I thought he was the coolest person I ever met. One day during recess, Mr. Schmitt had me and a few fellow sixth-graders line up at a flag pole in the school yard. He instructed us to climb to the top of the pole and then come down. My friend, Tom, was first. He jumped on the pole, wrapped his legs around it and hand-over-hand shimmied up and then down. Now that we all got the idea, could we climb
the pole and see who would be the fastest. After a few more successful pole climbers (and some very cocky sixth- graders), it was my turn. I was bound and determined to get up and down the pole faster than anyone else. Mr. Schmitt, however, had another idea. He instructed me to climb the pole using only my arms! I tried to argue fairness, but like the arguments with my Dad about eating all my food, I failed.
So I climbed up and down that pole using only my arms, and though Mr. Schmitt seemed unimpressed, I felt great about my accomplishment and started egging on my friends to do By Barry Hyman, MBA the same. Most couldn’t, so my ego grew. After all the dust settled, Mr. Schmitt pulled me aside and told me something that I will never forget: “In your life you will be asked to do things you never thought you could do, but you can, just like climbing a pole without legs.” As time passed, I realized that just like my Dad’s lesson, this wasn’t about me. It was a lesson of effort, ingenuity and persistence.
Frequently, I think about my Dad’s lesson of gratitude and generosity, and Mr. Schmitt’s lesson of rising above the challenge, and I feel very blessed. A long time has passed since then, and years have gone by in a blink of an eye. My Dad’s gone now, and I don’t know where Mr. Schmitt is, but I’ve learned that despite all of life’s challenges, being able to view each day with an attitude of gratitude, generosity and persistence has come in very handy.
Despite recessions, bank failures, massive government debt, terrorist attacks and other negative situations, the human condition continues to improve … as does our economic condition. Let’s all take a minute to reflect back, and I hope you will agree that we continue to make progress. Progress can be a bit slow sometimes, but maybe now we are learning a lesson in patience.
by Paul Sutherland on October 5, 2011
The lyrics from the traditional Christmas song “Do You Hear What I Hear,” specifically “do you see what I see,” have been replaying in my head during the last month as we continuously see opportunities and monitor our portfolios daily. The current market activity has naturally spurred many conversations with clients regarding specific holdings and overall portfolio construction. Therefore, I thought it would be helpful for me to take time to review our portfolios and provide a snapshot of some current FIM Group holdings. If I ever start to worry about our investments, I simply run through each and every one. Before bed, I typically review the key components of the news stream that could impact the portfolios and potentially cause us to take action. Analyzing the investments and their characteristics better prepare us when responding to market fluctuations and media mania. Clients hire us because of our “manager must manage” philosophy and our history of being on the right side of the “making money by effectively managing investments” practice.
At FIM Group, our current strategy is built around a muddle through, lowgrowth overall economy. So you will notice that there are few banks, retailers and manufacturers in your portfolios. Those industries are highly affected by the hyper-competitive environment we now live in, especially because of consumers’ desires to “just say no” to a new TV, pair of shoes, bigger house or La-Z-Boy. There are pockets of strength, like telecommunications, food, energy, entertainment and technology, but it’s not easy for any industry. We can’t just buy windmills or an energy company. Nuclear energy is on its way out, and renewable energy is in, but as any seller or manufacturer of solar panels or windmills will tell you, the “permitting process” of a project (i.e., sourcing, manufacturing and logistics, and design) can take years and experience tremendous delays. To be a successful investor, patience is mandatory; it is required even if you’re right on the money, because markets are volatile and consumers are unpredictable.
When we review our portfolios, we certainly find comfort in the fact that we have constructed solid portfolios that should perform well in the long term. Currently we see slow to no growth (+/-2%) in the U.S. and throughout most of the developed world. This will affect both the emerging economies and the hyper-exporting economies – as all statistics indicate they will not have the torrid growth of the past. We realize that investing under a slow growth assessment and not a bullish stance has consequences. We believe now more than at many times in our history it is time to prudently and realistically look at the downside twice and upside once on each investment. Today is a time to balance opportunity-seeking with prudent risk management. We do not believe that the world will break into prosperity for all, and shrug off the banking, debt, deficit, regulations, wars, governance, poverty, unemployment, underemployment, distribution inequalities and entitlement issues that are worldwide. When it comes to the “how-to” of investing in a low-growth economy, you simply need to look for five things represented in any company’s stock:
1. Hard-working, ethical and strong management
2. Quality (perhaps even great) products or services
3. Solid financials
4. Excess returns (lots of free cash flow/profits)
5. A “million” other things to fall into place depending on the specifics of the investment – which is why you hire a qualified portfolio manager
A Tour Around a FIM Group Portfolio
First, let’s travel to India, the home of Bollywood and a place where much of the world’s high-tech industry takes place. We own a Singapore-based real estate trust that owns properties in the corridors of India’s thriving hightech industry. Ascendas India REIT pays a cash dividend of more than 7%, which we expect to grow over time. Ascendas India REIT has good, skilled management, a solid balance sheet, strong growth, is located in a sector where there are barriers to entry, and can accommodate the need for infrastructure to serve the high-tech and quality needs of domestic and foreign companies. From India, let’s take a walkabout to Australia. Nearly all our Australian investments are paying well in excess of 4% current cash dividends. We own the main phone company, Telstra, which pays a nice cash dividend of 9%, Westfield REIT, which has a global
