Zeev's Turnips Patch-No Politics (ZEEV)

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*** Don Coxe's "Basic Points" ***

Basic Points

Don Coxe
May 27, 2005

Bulls & Bears, Foxes & Hedgehogs

Overview

A year ago, the stock market was telling us the commodity boomlet was history.
China's First Quarter GDP growth had fallen to a mere 4% and talk of a China
Crash had reached high-decibel levels on trading desks worldwide.

A year later, the stock market (but not, let us hasten to note, the commodities
market) proclaims a coming commodity collapse, led by the metals. The shrill
shills shriek that high oil prices and rising rates on short-term borrowing have
combined to produce a dangerous global economic slowdown.

The oft-quoted Chinese maxim that "A long journey begins with a single step"
counsels that major trends take time, and that changing course because of travel
problems is the tactic of the impatient, not of those with an appreciaton of
history.

This month we review our assumptions about history's direction in the early
decades of this millennium. Short-term market moves are driven primarily by
short-term-oriented investors. Although Warren Buffett's conviction that the
ideal holding period for a stock is forever, few of us have either his vision or his
staying power. Most of our clients are measured monthly or quarterly, and they
expect us to help them manage the kind of buffeting that besets long-term valueoriented
investors during the years before a major trend has found broad
acceptance in the marketplace.

We conduct this analysis with reference to the insight of Sir Isaiah Berlin, who
divided thinkers into two camps—foxes and hedgehogs. We attempt to show
that both types of thinking have their place in portfolio construction.

We are leaving our Recommended Asset Mix unchanged. The stock market has
handled the highly-publicized problems—General Motors and the financial
problems of some hedge funds—with seeming ease. We hope it lasts, but don't
wish to back that hope with new cash.

http://corporate.bmo.com/HarrisNesbitt/bresource/basicpoint/default.asp?id=5175