September 15, 2005                                      Some portfolio and investment thoughts:

a. We try to keep portfolio activity to a minimum. We believe that less trading is preferred to frequent trading. With that said, clients of ours will notice that our portfolios are being repositioned more aggressively during the last few weeks. This repositioning will continue as our research evolves.
b. We have eliminated several of our longer term positions. Please call us or email us if you are a client of ours and would like to discuss the theories of these changes.
c. Our fixed income positions will always have greater trading frequency. Typically these positions are temporary in nature. They are temporary for various reasons. Sometimes we feel they are bargains at certain prices and will buy while we perceive that bargain exists, and at other times we will sell when we feel that the “bargain” has subsided. We also might sell for reasons of freeing up cash for other longer term positions.
d. Remember, we are long term investors! We are focused on portfolio positioning and not portfolio performance.

e. We attempt to be tax efficient. Over the years we have been successful in tax efficiency. We do not currently have many tax losses available for our clients that have been with us for a longer period of time. Hence, portfolios might feel a bit of a tax bite this year as compared to previous years. Nevertheless, we are always focused on tax efficiency. This is evident in our typical “buy and hold style”. Buying and holding gives us the ability to generate preferential long-term capital gains. If you have questions on your portfolio in this manner, please just let us know.

f. We remain focused on long term investing. We are experiencing unusual economic times. Please read our thoughts on our September 16th discussion for more insight into our thoughts.