This was supposed to be the summer of the People's Republic of China. The Olympics' opening ceremony did nothing to dispel that theory and its pomp and circumstance served to show the world how this prior 3rd world country of 1.3M people is now one of its leaders in all things modern and innovative. Yet something happened on the way to the Aquatic centre; a strapping, gangly, 23 year old Baltimorean stole the show. Michael Phelps has become the iconic figure that emerged from these Olympics, a world wide phenomenon that captured the imagination of all that watched him corner the market on Gold Medals and the pursuit of perfection! Not to be forgotten are his teammates that assisted in this endeavour as several of his medals were earned as part of relay races as well.   more...

Over the course of the past quarter two material barometers in the financial sector have been breeched. The price of oil that had yet to reach and close consistently in excess of $100 a barrel, it is now a daily occurrence and recently hit a high of $127. The greatest difference over the past few years or so is that we have moved from a supply-led market to a demand led one. OPEC’s spare capacity twenty years ago was approximately 10M barrels a day, today it is 2.5M barrels. The safety margin used to insure price stability has eroded with no relief in sight. Oil demand is up dramatically especially in India and China where both countries’ economics are flourishing. So thus, with supply limited and increasing demand, the stigma of $100 barrel oil has evaporated. Worldwide efforts to stem the reliance on oil is increasing including alternative energy measures, deep water drilling and increased exploration for new resources.  more...

King James, Only in America

As we recently concluded the 2003 NBA draft, it’s an appropriate time to highlight the “hoopla” (no pun intended) over the 18 year old phenom LeBron James, the recently graduated high schooler drafted first by the perpetually woeful Cleveland Cavaliers. The 6’8 native of Akron, Ohio was not the initial high schooler drafted first; that distinction happened in 2001 with Kwame Brown of the Washington Wizards. Nor was the attention and notoriety showered on him particularly unusual; last year’s first pick Yao Ming, the gentle 7’5 Chinese immigrant giant of the Houston Rockets, was worldwide news. King James was, however, record setting when it comes to what our society clearly judges success by: KACHING! Before playing one professional game, one practice or even graduating from High School, he signed a $5M contract with a collectible card company and even more unbelievable, NIKE announced a $90M, 7 year contract to create a LeBron James signature shoe. more...

On this, the fifth year anniversary of Wellfleet Partners, our 20th newsletter and what would have been my father’s 84th birthday, we have much to both be thankful and to pray for. Again, as we were 12/13 years ago, our country is embroiled in a military conflict in the Persian Gulf. While controversial with the citizens of this great nation and the cause of enormous turmoil in the financial markets, we again are drawing the sword in the defense of freedom, democracy and human rights. With our beloved British partners and other allies, “Operation Iraqi Freedom” is, as of this printing, entering the final stages of resistance. Awash in our successful military campaign, the cost has been great: over 100 treasured soldiers and financial considerations unheard of in the world’s history (over $75 B). While many questions remain, the war to remove Saddam Hussein’s reign of terror can only end in a total victory. I am once again called on to quote from and expound upon the deeds and efforts of Winston Churchill, the Great English leader. more...

“The British are Coming”

England, as we’re rediscovered in 2002, is not only our ancestor’s homeland but also our closest alley and friend. Prime Minister Tony Blair and Parliaments’ enormous support of America’s ubiquitous fight against terrorism has “warmed the cockles” of all Americans. As we battle not only the forces of the “Axis of Evil”, Afghanistan, Yemen, North Korea and most recently Iraq, we likewise are forcing a swarm of Anti-American sentiment perhaps unprecedented in our nations 227 years history. Closely paralleling the anti-Imperialism that the British Empire endured in the 19th and 20th centuries, we face the road ahead surrounded by few friends, some old, some new. While Israel traditionally and Russia recently have proven to be bedrocks of American support, England is our most valued and treasured friend. With its 2,000 year history, multi-cultured democratic society, we emulate its freedoms (without the Monarchy of course). more...

“September 11th Revisited”

A MAN OF "4 SEASONS"

Over the past six months, a popular topic in the economic news is that of corporate Chief Executive Officers, their integrity and ethics in business or lack thereof. This is in direct contrast to the Founder, Chairman and CEO of the Four Seasons Hotel and Resort. The chain which currently manages and operates 51 luxury hotels and resorts in 22 countries, lives by the CEO’s "Golden Rule," "Treat others as you wish to be treated." Isadore Sharp, who emigrated from Israel to Canada, built motels in Toronto in the 50’s. In 1961, he built his first Hotel in downtown Toronto and a second in London in 1970. After a successful conference center built as a joint project with ITT, he turned down an offer to be acquired by the aforementioned conglomerate as the contrast in operational styles and his desire to remain independent eventually won out. Over the next decade, he led the Company through enormous growth opening or operating new Hotels in Canada (4) and America (3). Finally in the 90’s the Four Seasons expanded internationally, went public on the Toronto Stock Exchange, switched to the NYSE (’97) and was named by Fortune Magazine as one of the "100 Best Companies to work for in America". While the Hotel chain remains one of the world’s best and this author’s personal favorite (a recent trip to its Las Vegas location only solidified my opinion), its founder and Chairman continues to stress excellence of service, the chains’ corporate philosophy of putting the customer’s needs and interests always first and carefully screens the quality of all his employees to ensure it. more...

A STONE IN OUR PATH

In ancient times, a King had a boulder placed on a roadway. Then he hid and watched to see if anyone would remove the huge rock. Some of the king’s wealthiest merchants and couriers came by and simply walked around it. Many loudly blamed the king for not keeping the roads clear, but none did anything about getting the stone out of the way. Then a peasant came along carrying a load of vegetables. Upon approaching the boulder, the peasant laid down his burden and tried to move the stone to the side of the road. After much pushing and straining, he finally succeeded. After the peasant picked up his load of vegetables, he noticed a purse lying in the road where the boulder had been. The purse contained many gold coins and a note from the king indicating that the gold was for the person who removed the boulder from the roadway. The peasant learned that every obstacle presents an opportunity to improve our own condition. more...

DÉJÀ VU – NEW YORK CITY

Over 80 years and almost to the day in September, an explosion rocked the nation’s financial center, downtown New York City. A horse drawn wagon stopped in front of J.P. Morgan & Co. and its bank the Morgan Bank on the corner of Wall and Broad. Just before noon it exploded violently sending chunks of shrapnel in every direction. There were numerous victims, yet some like Joseph P. Kennedy and Seward Prosser – President of Bankers Trust narrowly escaped death. Others, such as a young runner who begged passers by to take and deliver his securities and Edward Sweet, owner of the popular Sweet’s Restaurant, were not as lucky. Trading at the New York Stock Exchange, hundreds of feet from "Ground Zero" was stopped less than a minute after the explosion. Had the bomb exploded several moments later during the busy lunch hour, instead of 40 dead and hundreds wounded perhaps thousands would have been adversely affected. more...

"Why It is Elementary Watson!"

There is an amusing anecdote about the renown Inspector Sherlock Holmes and his trusted sidekick Watson. Once, while the sleuth was investigating a case in the desert he left the campsite for the day and by nighttime, to their great chagrin, their tent had been stolen. While standing on their tent site, Holmes asked Watson to look up and tell him what he saw. Thinking this was either a test of his astronomical skills or an attempt to figure out their location based on the heavens above, Watson went into a 20 minute dissertation about the stars, moon and the milky way. After several minutes of silence post Watson’s response and realizing it might not have been the answer sought, Watson asked: "What is it you see? "Without a moments hesitation Sherlock Holmes responded: Someone’s stolen our tent." more...

"Stock Tip with that Shine?"

There is a famous story about Joseph Kennedy who, in the 20’s was known to get a shoe shine each day as he entered the financial district on his way to the New York Stock Exchange. The Big Apple buzzed with money talk as the stock market was at an all-time high. The shoe shiner spent 20 minutes giving the father of our future President stock tip after stock tip. After flipping him a quarter, Kennedy promptly went to the Exchange and sold off his entire portfolio. A mere nine days later the market crashed. When asked about his fortuitous timing, Kennedy observed in a letter, "When the shoe shine guy gives you stock tips, it is time to get out!" more...

Recently the Duke University Blue Devils Mens Collegic basketball team won the NCAA Championship with a thrilling victory over the Arizona Wild Cats in the final game. The Semi-finals, which included two other highly ranked collegic teams, Michigan State and Maryland, together with Duke and Arizona, were the 1st, 2nd, 3rd and 6th ranked teams in the country at the regular season’s end. When asked about the lack of a surprise Cinderella team from the 65 candidates in the final four, Duke’s great and revered coach Mike Krzyzewski stated: "We could have played this thing in November and saved a lot of trouble." This mirrored a sentiment prevailing in the financial sector currently, the "I told you to expect this" scenario. It seems like everyone knows someone who somehow predicted the past year’s technology market’s "fall from grace." Surprisingly, although many claim to have predicted the "Dot com demise," few actually avoided the hysteria or benefited from the short-side. It’s easy, as Coach K is affectionately known in the basketball circles, to say we could have avoided going through it; it’s much more difficult to actually DO IT as Duke recently did. more...

Robinson Crusoe, circa 2001

Recently there was a wonderful editorial written in the Wall Street Journal comparing the box office smash movie "Cast Away", starring Tom Hanks as a latter day Robinson Crusoe, to the character of the same title from Daniel Defoe's classic novel. Apparently the two characters, although both ships were wrecked on a South Pacific Island, are very different indeed. Robinson Crusoe, a slave trader in the mid 1600's, was a handy hunter surviving on goats, turtles and birds for sustenance. He fought off cannibals, mutinous sailors, read the bible religiously, kept a journal and generally reflected on the state of his soul and G-d's divine reasons for saving him; Tom Hanks, who plays Chuck Nolan, a Fed Ex operative, is quite handy himself but does not have to endure any of the life threatening drama of his literary predecessor. He subsides on fish and coconuts and spends most of his waking hours pining for an ex-love and speaking to a volleyball. Emerging from 4 years of isolation, Nolan readjusts into society in short speed and seeks a new love; Crusoe, after 28 years, returns a changed and much better man. His soul redeemed, he found both a clear sense of religion and meaning to his existence. While Nolan may be our true latter day "everyman", true to our environment and forever seeking love and relationships, what lessons were learned? And what modern day lessons do we, the viewer get from this movie versus the oft-read, previously mandatory part of our school curriculum? more...

DOT CALM
Fall 2000

There is an interesting story surrounding the history of the Gutenberg Bible and the birth of the most lasting medium so far, the printing press. In Germany, a small city called Mainz recently celebrated the 600th birthday of its most famous son, Henchen Gensfleisch zur Laden zum Gutenberg. Although there were no newspapers obviously to print up his memorable achievements nor any known descendants or even portraits, we do have a cursory background on the man. Born about 1400, he was educated at the University of Erfurt and then, after graduation, became a souvenir maker for pilgrims. He later embarked upon a project known as a "aventur"; loosely translated, it defines a project that involves risk that may or may not become profitable. Sounds like venture capital! Of course he later opened the first movable printing business and finally produced what scholars call the B42, the 42 line Bible. Many of the world's greatest inventions started just like Gutenberg's printing press, an "aventur". Those that have succeeded over the past decade have created wealth, albeit paper wealth, unbeknownst to man. more...

"The Internet Changes Everything"

"In 1385, on the eve of his victory over the Castilians, King James of Portugal addressed the 60 warriors he had just made knights. "Good my lords," he instructed, "this order of chivalry is so high and so noble, that he who is a knight should have no dealing with anything that is low, with vile things or with cowardice."

"Those were the days when men wore metal and honor was worth dying for, and when the king told you not to deal with anything low, you knew what he was talking about. Back then, people knew who was high-the aristocrats and who was low: the peasants. They knew which professions were high and which were low. These hierarchies have now been blown to smithereens. The old cultural arbiters have lost their authority, and now we live in a hopeless mishmash of brands, Web pages, advertising images, performance art and cross-referencing cultural signifiers." The Internet has changed everything and continues to level the playing field by democratizing the dissemination of information for the wider populace." more...

"Leprechauns of the Millennium"

There is a story about the famed Irish novelist Sean O'Faolain who once quoted an old peasant woman on the subject of leprechauns. "Do you believe in them? he asked her. "I do not", she said, "but they're out there!" I guess we feel the same way out the Y2K bug. We understand the potential problems and we know they're there; we just don't believe it will have the material effect on the world as advertised. Yet, to a vast audience of anyone that will listen, an entire industry was borne just to address the potential problems of the Millennium. It has effected the market which hates uncertainty and plagues corporate planners. For our readers, we are going out on the limb and predicting that come January 1st, 2000, except for some minor glitches, it will be " all quiet on the Western front." Perhaps the Japanese would understand this best. In Japan there is a concept or expression called honne to tatemae, or roughly: There is the official line and then there is what we know to be true. more...

"All Roads Lead to Rome"

While on my summer vacation with my wife Paula, our tour guide explained how the ancient and majestic city of Rome was built surrounded by 7 hills and that all the roads thus led into the City. Zachary and I, who have been espousing the virtues of the internet and investing in new technologies that are transforming the business landscape, feel likewise that all roads leading to the Millennium will go through the World Wide Web. The Internet is spreading like wildfire; transforming society and markets at, not arithmetic, but geometric rates. The net, expanding at almost 50% per year, is becoming as American as the TV, car and/or cell phone. The personal computer, a mere 17 years old, boasts ownership in almost 50% of U.S. households and 85% of schools. Yet many investors ask, are the opportunities to invest in this industry still worth the risk? Does upside still exist? more...

Over the past two months, we have seen a precipitous fall from previous peaks for the majority of Internet stock. Since closing at a record 318.32 on April 13th, the 40 stock Dow Jones Internet Index has fallen approximately 40% although it still retains an approximate 40% appreciation from the beginning of the year. The question has arisen as to whether the sector is pulling back, has entered into a prolonged bear market or whether the "bloom is off the rose" for good! more...

Over the past six months since we instituted day to day working operations for Wellfleet Partners, Inc. ("WP"), Zachary and I have felt that it was important to communicate in a written form with our current and future corporate and individual clients and professional associates. I was unprepared for both the tremendous favorable response to our first 4 newsletters and the amount of hard work and effort necessary to produce a monthly communication that we could be proud of. Several friends of mine gave us two suggestions which we will gladly follow. more...

In a recent WORTH Magazine article, Peter Lynch, the world renown Money Manager that made the Fidelity Fund a household name, asked several of his friends to once again in 1999 identify their favorite stocks for the near and short term. Although each of the respective seven money managers had their respective share of successes in 1998 by sticking with the perennial large cap winners, of Nifty Fifty such as Dell, Intel, Pfizer, what surprised me was the equal amount of losers from last year's picks e.g. Washington Mutual, CB Richard Ellis, Four Seasons Hotel, Firearms Training Systems, Timberland... This shows how difficult it is even for the professionals to prognosticate! more...

The financial service industry is changing perhaps more rapidly than any other in the world today. The regulatory barriers that had maintained separation between financial service companies, banks and insurance companies have eroded heightening competition and encouraging massive cross-industry consolidation. The mutual fund industry has also grown in such an enormous manner that it seriously competes with the entire financial service industry. more...

In our last communication dated November 4th, we discussed the opportunities afforded by the small cap marketplace. Since October 8th, the Russell 2000 index of small caps have surged 25%. Since the small caps were beaten down the same if not more during the recent summer meltdown and a dollar earned at a small company is the same as that of a large company, it was an obviously attractive sector to look into. more...

Over the past several months we have experienced market turbulence previously unknown to Wall Street. Many of your portfolios, especially those that included small cap equities, experienced almost crises management proportions. Those of you that held onto your positions are only now seeing some of them return to prior levels. Investments in the smaller cap markets can often be long term and navigating your portfolio these cycles can be difficult emotionally and require significant handholding. more...