• Financial & Investment Management Group
  • Tuesday, January 06, 2009

Waterboarding My Beliefs

by Paul Sutherland
Posted August 11, 2008
FIM Group
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I believe the world, at its core, is good. I believe that the universal values of courage, justice, humanity, temperance, transcendence and wisdom are common to everyone's intrinsic DNA. I believe we have more in common than we don't, but I also believe we see, hear and experience things very differently. There are lots of quotes about beliefs:

"Live your beliefs and you can turn the world around."
~ Henry David Thoreau

"It's not the events of our lives that shape us, but our beliefs as to what those events mean."
~ Anthony Robbins

"In religion and politics people's beliefs and convictions are in almost every case gotten at second–hand, and without examination, from authorities who have not themselves examined the questions at issue but have taken them at second–hand from others."
~ Mark Twain

Some believe our world is melting down. They believe terrorism, war, poverty, greed, selfishness and indifference have caught up with us, and giant deficits, pollution, business failures, violence and other social and economic ills are their offspring. Clarity, reality and absolute empirical truth, no matter how sound their truthfulness, are subjective.

My beliefs have been challenged this past couple of months. What if oil goes to $500 and the U.S. dollar continues to decline? What if all the banks fail, anarchy takes hold and terrorists seize an opportunity? I know the importance of challenging my beliefs and how to mind–map complex problems, but what if the rating agencies that just reaffirmed our country's credit as AAA are wrong? What if the United States is more akin to Argentina or Rwanda than a real, honest–to–truth, rock solid, rich AAA country?

In the August 2008 issue of Vanity Fair, Christopher Hitchens wrote about a personal waterboarding torture experience. He recruited "extremely hardened veterans," who now train American soldiers on how to resist waterboarding, to conduct the procedure on him personally. His conclusion: "I would [have] quite readily supplied any answer."

Fortunately, I have not been waterboarded, but I do not think that even under such torture I would admit our world doesn't work anymore or suggest selling everything, and putting it in a tin can under a mattress. Perhaps I am hostage to my investment beliefs, but they come from education, experience, introspection, observation and scientific inquiry. Of course, they still must be challenged and questioned.

Some think economies are built on dreams, imagination and desire. That is true, but really economics is about life – living it, striving to better it and just getting up to earn a living. And I'd say that is true even if threatened by waterboarding.

So even under threat of waterboarding, what would I say my number–one portfolio worry is? It is the same as it has been for 24 years – that we do not exceed our clients' and shareholders' expectations. We have a good history of exceeding expectations over the last 24 years, not to say there have not been a few bumps. Actually, there have been several bumps, according to Barry Hyman, our historian (at least for this article), who looked to our internal statistics for the last seven years.

The statistics for the 2000–2003 FIM Group performance period are readily available and carefully reprinted below. They show the calendar year periods and subsequent year's rebound. They do not show the peak to trough periods and subsequent recovery, but we will be highlighting those numbers in our next newsletter.

Economic cycles, like the seasons or Earth's rotation, are not some quirky "invention" of an economist. Economic and business cycles are rooted in our DNA – we humans move, we create, we work to eat, and we live a happy life and avoid suffering. The current unease over the investment climate, like Mr. Hitchens' waterboarding experience, will end. His ended with a simple hand signal to the veterans to stop and release him. Ours, maybe, will take more patience; for others, faith; and still for others, rational empirical scientific understanding. Regardless, we believe our portfolios are positioned correctly to perform. Meanwhile, we will continue to collect dividends and interest from good, solid investments.

 
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