Wall Street Transcript Investment Manager Interviews

TWST: Let’s discuss Sanco Services’ superior performance from 2000 thru 2002. Can you provide some insight into how you achieved such performance? (CLICK FOR DETAILS)

Mr. Selengut: I would say that having a client base where not one individual client lost money over the last three years, and where the average client was up around 28% -- that that was far better -- not just than most -- but probably all of the professional managers on Wall Street and off Wall Street, for that matter. It’s really easy to understand when you appreciate the fact that my investment concepts and strategies do not involve mutual funds. They don’t go near things like new issues and over-the-counter securities. My emphasis is on high quality, dividend-paying, New York Stock Exchange stocks that I trade frequently for my clients.

In this last three year period, that Wall Street wants the world to think of as a blood bath in the securities markets, what we really had was a blood bath in the high speculation-type securities that Wall Street was pushing in the late 1990s. If you were not in those types of securities, you could easily have made money during the past three years. That’s really the secret of the success of my portfolios during the period. It’s as simple as that.

TWST: I read your new book The Brainwashing of the American Investor. Its sub-title is The Book That Wall Street Does Not Want You to Read. Can you say why you’re managing away from Wall Street?

Mr. Selengut: That actually started way back in 1979. There’s a story in the book that I call “Boeing-Boeing”, circa 1976 or 1977, which took place when I was just developing my own portfolio. I was on a business trip somewhere out in the Midwest and I was talking to one of my employer’s portfolio managers. I asked why they kept so much Boeing stock in this separate account. (Separate account was a term they used in those days for Insurance Company mutual funds.) Why did they have so much Boeing when the current market value was two or three times higher than their cost basis?

I asked him, “Why don’t you sell this and move into some other securities that are down in price or move into something that generates some income?”

The response was simply that Boeing was a big insurance client and liked them (my employer) to keep a large Boeing position in their portfolios. It dawned on me that the presence of this particular company’s stock in the portfolio had nothing to do with the investment merits of Boeing and everything to do with inter-company politics. From that point in time, I resolved that I would be looking to take profits on any stock I owned that went up in price, no matter what the purported reason! Prices weren’t buoyed up just because of the fundamentals that I had been studying; it was a combination of the fundamentals and the politics. I would take my profits and move on to something else.

At that point, when that light went on, that’s when I discovered a trading strategy that has worked well and that allowed me to retire from that particular employer in 1979 when I was about 34 years old. That’s how the strategy came about. That’s how it all began.

TWST: In your chapter on “managing the ignorance”, you say that to invest profitably, you have to be able to know what is and what is not knowable.

Mr. Selengut: I think one of the things I say right there at the start of that section is that Wall Street spends billions of dollars a year paying thousands of MBAs and PhDs to convince the public that they can predict the future, when in fact they can’t -- nobody can. But with their impressive credentials and statistics and with huge marketing departments behind them, these analysts are out there touting securities and touting economic theories as they could predict where something is going to be next week or next year. There just is no “know” in investing.

Every day, if you look at the AOL business section, they tell you what’s going to happen today! They know what 12 stocks you should have in your portfolio to be successful this year, for example, and they’re so convincing that the public is just constantly drawn into things with great and unrealistic expectations. Generally, none of it’s going to come true because no one really can predict the future.

So here we have an environment for managing an investment portfolio which is really just like managing any other business. If you were running any other type of company and somebody told you they can predict what your sales were going to be next March or next September, you’d be skeptical! There’s no way you can know that, pal. What we have to do is prepare for contingencies. We have to manage our assets wisely. We have to control our inventory. We have to do all these neat things that we learned about in business school, or else we’re going to lose money in our operations. WE have to Plan, to Organize, to Control.

The same type of managerial approach has to be taken toward investing in the stock market. You know what’s going on today. You know if you have a potential profit and you take it that you’ve made money. You only know that after you’ve pulled the trigger and taken that profit.

So that’s how you manage the ignorance of Wall Street. You don’t pretend to know the future. You deal with it just like you would manage any other type of enterprise. The investment world is a world of uncertainty, always. It’s really not a matter of degree.

Mr. Selengut: I think the rewards are very clear. You always have an idea of what you own. You know you control a diversified portfolio of good quality companies and you have a target for each of these in mind. So when it’s reached, just as you would when someone comes into your store and wants to buy a pint of ice cream, you sell it. You don’t hold onto it because some analyst in the industry has said that the price of ice cream is going to go up. You don’t deal with it in that manner. What you have is a dynamic group of securities that you’re planning on turning over, just as McDonald’s turns over its hamburger inventory. The strategy puts you in a position where you don’t have to worry about what the future is going to bring. You understand and know what to expect from the securities you own, equity and fixed income. You know that the stock market goes up and down, it’s volatile, that’s its nature, and you profit from that by buying when things are down in value and selling them when they go up in value. So you really put yourself on a footing that separates you from the media hype and self-serving analysis that is out there to make you transact on someone else’s terms. You put yourself into more of a reality mode than the fantasyland of the Wall Street Casino. You have profit taking cash available when prices move lower and you regenerate that cash when prices move back up. Most people do the opposite.

Mr. Selengut: You control (Actually, you attempt to minimize it, because you must understand that you can’t eliminate it.) investment risk in several ways. The first way is to only invest in high quality companies, based on information you can obtain from the Standard & Poor’s monthly stock guide. Companies are rated as to their fundamental investment merits, and you get the financial details you need to determine risk level based on current ratio, profitability, dividend history, etc. These are very important things to know about a company that you’re going to invest in.

You stick with quality, you stick with income-producing securities, because if they’re sound enough financially to pay a dividend and pay their bills on time, they’re likely to stay in business, and you can monitor changes in them more easily than you can in a company that never pays out a dividend.

The next area of risk control would be having a diversification formula that limits your exposure to less than 5% of your assets in any one security. If people over the past couple of years had adopted that simple rule, the WorldCom and Enron crises and bankruptcies of that nature would hardly have been a pin prick to their portfolios instead of being a disaster. No one should allow themselves to be brutalized by one loss of that magnitude. The diversification element is very important.

Finally, I would say that the third element is having a workable asset allocation formula, and that really is the long-term aspect of the investment program. An asset allocation formula is something you develop to achieve specific goals years down the road so that you know that every dollar of income that makes its way into your portfolio is going to be split between fixed income and equity securities so that your income always grows from year to year and you are prepared for possible contingencies in the future.

TWST: What is your current thinking on asset allocation for your portfolios?

Mr. Selengut: Every portfolio is different. I have people who range in age from the first year of life to my mother who will be 91 in February. Every one of these portfolios will require a different allocation. Some of my clients are 100% in the stock market; some are 100% in municipal bonds. So every individual who is going out there to invest their money must determine the allocation that is right for their circumstances. And that’s another of the problems we have in, let’s say, the Wall Street investment scenario. There is always the emphasis on a one-size-fits-all product being suitable for every investor, and my feeling is that is just totally untrue. Combine this with the tax code making people afraid of realizing investment income, and you have an emotional problem that has to be dealt with. Income really has to be encouraged, and it isn’t.

I am never afraid of the stock market. Wall Street plays the two human emotions of fear and greed like an orchestra. Right now most people are still playing the fear scenario: “The stock market is lousy, we can’t go there, so now we’re going to buy bonds,” when bonds are at their highest prices in decades. Or, “Let’s buy gold,” which has been the worst performing investment in decades, because we’re afraid of the stock market. They have to sell something because that’s the way they make money, so now they’re pushing the fear products. Hopefully pretty soon they’ll start pushing those greed products again and then you’ll see them unwrap those new issues. Have you noticed that there are no IPOs when the market is down? Isn’t that strange?

Mr. Selengut: As I say in The Brainwashing of the American Investor, volatility is the investor’s best friend, and the reason is very simple. I’m looking for large movements in the same companies over and over again so that I can buy them as they move lower and then sell them as soon as I can make a 10% profit on them. This can play out month-to-month or week-to-week in the stock market when it’s as volatile as it has been recently. I’m probably one of the few people who have taken profits on 20 different stocks already just in January, and on many of the stocks I bought in December. That’s the type of scenario that makes money in the stock market: You buy a good company, one that you feel quite sure is not going to go out of business, even if it goes down in price. If you’re fortunate enough that it goes up in price, you sell it and buy another one. At the moment, there are many, many excellent companies that are especially well priced for that type of trading, let’s say, and when I speak of trading I don’t mean it in the sense of day trading thousands of shares of the same security. I think we’ve already talked about the quality and diversification rules that I employ. But today we have A-rated companies like Air Products and Lowe’s, MBNA and PepsiCo, Pfizer and Royal Dutch, and Wal-Mart that are down between 20% and 30% from where they’ve been in the past year. These are ideal short-term trading situations in high quality companies that I try to take advantage of on a day-to-day basis for my clients.

TWST: You have said that research that is produced “outside” is self-serving sales propaganda. Tell us about your internal research.

Mr. Selengut: My comments on research were pretty accurate, weren’t they, considering the recent scandals. Wall Street research is simply sales propaganda. One thing that we could bring out in the space of this interview is the nature of the information that we’re allowed to receive as individuals in this country. Someone like me who is not a Wall Street person, who doesn’t have the backing of a large company or the large bucks of an advertising program from a giant corporation, just can’t be heard. No matter what kind of warnings we might put out there, we’re just not heard. I have fewer than 100 clients, and those 100 clients benefited from my strategies these past three years. But hundreds of thousands of people were led to the slaughter, and if they had been privy to even some of what we’ve been talking about, they wouldn’t have gotten hurt at all. It’s mind-boggling.

Fortune Magazine in its January 8 issue has an article on a guy named Jack Bogle, the founder of the Vanguard Funds. In this article, written by Justin Fox, he is really putting down the mutual funds and saying that they’ve gone far a field from how they were originally managed and structured. They are no longer providing the “safe” environment for investors that they used to, and the whole concept of the mutual fund really has been destroyed. There’s just no incentive to satisfy the needs of the investors. They’re satisfying the needs of their corporate shareholders, and the managers within them are out there to make as much money for themselves as possible in bonuses and sports superstar salaries. So it’s really annoying to people like myself, who don’t have that big-company bankroll behind them. We never get noticed; our information and the message that we have to send are just not heard. Pity. That simple S & P stock guide is all the research you’ll ever need.

TWST: What are your thoughts on the conflict of interest problems between research analysts and investment banking?

Mr. Selengut: Let’s say you have an investment banking company and you also own a mutual fund company under the same organization, the same institutional hydra, so to speak; vertical and horizontal integration to the Nth power, pretty scary. Certainly, if you’re bringing XYZ Pot Company public, you’re going to insist that your Mutual Fund arm has some in their portfolios, and your retail brokers get extra incentives to push the sale. Let’s say you have a person who is in a value fund and, unsuspectingly, he suddenly owns this issue. The conflict of interest is enormous. They shouldn’t even be allowed in the same house. If you bring a company public, nobody in your sales force should be able to sell it. They have to do something to fix that. But don’t hold your breath.

TWST: Do you see any possible changes that will help to resolve this conflict of interest problem? Do you think it’s always going to exist to a degree?

Mr. Selengut: I think it’s always going to exist. I think as long as you have the kind of dollars we’re talking about, you’re going to have people who become dishonest under the weight of the temptation. As long as you have a media that is afraid to ruffle the feathers of these types of people, it’s going to be that way. You never really heard the media issue warnings like: “Wait a minute, this doesn’t sound too kosher. This guy works for the same company, etc.”. All these things were well known. I never listened, and I’m not even in the inner circle. Again, a lot of people out there knew that what analysts say is just advertising copy; it’s not really research at all. The future is non-predictable but the sheep will always follow. If you tell Joe investor that this is a good thing, he’s going to buy it. Wall Street can sell anything to anybody.

TWST: Let’s move on to your stock holdings. You usually have a pretty eclectic group of companies rather than concentrating on specific sectors.

Mr. Selengut: I think you’ll find that right now there are many retail companies on my list of things that I can be buying because the sector is weak. But at the same time, as I mentioned, you have Air Products, Automatic Data Processing, Carnival Cruise and Federal Signal. That’s four different industries right there, and that’s sort of the nature of what’s going on right now, because the market is generally weak. So you’re going to find good companies in many, many industries, and putting together a well diversified portfolio today is a piece of cake, although most people of course are afraid to do that. And until the market goes up a thousand points, most people are not going to be interested in getting back in. It’s the only place in the world where people like to buy high. I’ve never quite understood this irrationality.

Mr. Selengut: Extremely. You have to be, or what’s the point. Remember, there is no “know”.

TWST: Tell us more about your individual investment decision-making analysis.

Mr. Selengut: When I buy a stock, I always know exactly at what point I’m willing to take my profits. As soon as I can establish a 10% gain, I’m ready to sell that security and find something else. And I’ve never been unable to find something else. I think at one point back in August, 1987 I only had two or three stocks that met my buy criteria from a price standpoint, not from a quality standpoint, so I just held my “smart cash”, as I like to call it, waiting for a correction, which actually was going on for about a month before the computer loop in October. If nothing really meets my requirements, I’m not going to take a lower quality, or higher priced issues just because I have money to spend. I also added a bit extra to my fixed income allocation while waiting for more equity opportunities. But it’s not a matter of being in or out of the stock market, it’s just a matter of selecting companies only when they’re at certain levels, and making sure that you don’t hold on and say, “I just heard a Merrill Lynch analyst say that Dow Chemical is right now at $45 and he feels that it’s going to $62.” Well, if I bought it at $45 and it goes to $50 or so, I’d be out, because if I can make a 10% profit on the same money several times a year, I’m going to do all right for my clients.

Mr. Selengut: I’ve always invested in companies that pay a dividend and/or interest, and I guess that goes back probably to my parents’ background in real estate and owning commercial real estate that paid rentals. Your money has to be working for you. It can’t just be sitting there glistening and pretending to be wealth. You could have millions of dollars’ worth of Microsoft, and if that’s all you had and you didn’t have a job, you wouldn’t be able to buy dinner, because Microsoft doesn’t pay a dividend (it announced that it would begin to do so on January 17^th). So my concept has always been that I will never invest in anything that doesn’t pay me something. But I don’t buy stocks particularly for the purpose of generating income. I think the income that you gain on an equity investment is gravy, just as taking capital gains on a fixed income investment is gravy, because you buy them just for the income. I buy dividend-paying stocks because the payment of a dividend proves the point that the company is financially sound. It also gives you an insight into the weakening of a company’s financials.

For example, AT&T had to go around and around the boardroom and do 24-hour think tank sessions before they cut their dividend. No company wants to cut its dividend. And one of the interesting things that you’ll find is while everybody is saying how bad the economy is and how weak things are right now, how many major companies do you think have cut their dividend over the last three years? I’d be willing to bet that not 10 of the major companies. In fact most companies have probably done their usual raising of the dividend every six to eight quarters. It doesn’t change. It’s a matter of perception, and the perception that Wall Street wants you to have right now is that we have a weak market. Why? The reason is they don’t want to admit, that during the late 1990s, they led most investors down the garden path into worthless securities. They don’t want to take that full in the face. They had to develop an economic downturn so that there were extenuating circumstances for this failure. It wasn’t their fault.

Mr. Selengut: Just because of the fear in the marketplace, people are staying away from equity investments. There’s cash on the sidelines, I’m told. People are buying bonds for the wrong reason, changing their investment allocation because they’re afraid of the stock market. They’re waiting for somebody to ring a bell and say, “Okay guys, it’s okay to come back into the stock market,” which is really foolish. And when they start doing that, I’ll be taking profits!

That’s the only reason I can think of at all, just this fear. Frankly, it’s always this way. I don’t understand it. I don’t understand why people are afraid to buy companies when they’re down in price. I just never have been able to understand that. We’ve had worse economic/political/social scenarios than this many times. It’s just not as big a problem as its being blown up to.

TWST: What would you consider to be some of the best bargains in your portfolios at this time?

Mr. Selengut: I think I mentioned four of them. Let’s go back to Lowe’s, Wal-Mart, Royal Dutch, Pfizer, Pepsi, MBNA Corp, Home Depot, Equifax; there’s Texas Instruments, believe it or not; there’s Conoco Phillips, Abbott Labs -- there are so many. Go down a list of companies rated B + or better by Standard & Poor’s Corporation; and there are fewer than 200 on the New York Stock Exchange that also pay a dividend. You’ll find so many companies that are down 20% or more from their one-month highs that you don’t have enough money to buy 100 shares of all of them -- but doing so wouldn’t be a bad idea. For example, you’ve got Walgreen, Verizon, Tootsie Roll, Tiffany’s, Talbot’s, and Sony.

TWST: You have mentioned Verizon and Texas Instruments. How many technology companies these days would qualify for your investment parameters?

Mr. Selengut: Oh, dozens. I don’t mind technology companies as long as they meet those other requirements. They have to be B+ rated, they have to be profitable, and they have to pay dividends. You have a company like Phillips Electric -- or even Nokia, I don’t feel uncomfortable about a position in Nokia. But remember, again, everything has its rules, and I have some rather technical buying rules that I outline in my book with regard to the movement of a stock’s price from month to month so that a stock may be below its high by more than 20% but it may have moved up too much recently to be a “buy”. For example, take Lehman Brothers. It’s still down in that regard, but it’s moved up 6 or 7 points in the last couple of months -- so you don’t want to go near something like that, because somebody like me will be taking profits, somebody who controls larger positions. It’s dangerous to buy stocks that have moved up that rapidly in a short period of time.

There are other considerations than the cursory ones we’re going over here. If someone wanted to adopt a strategy similar to mine, they can’t do it just on the basis of this interview. They really have to get into the details that are described in The Brainwashing of the American Investor.

But there are dozens and dozens and dozens of companies right now that meet most of my buy parameters.

TWST: One of the things we’ve been told over the past year is how important it is to find good management -- and you have a lot to say about so-called management.

Mr. Selengut: You know, I’m sure 75% of the people who read this interview in The Wall Street Transcript are going to be in large organizations, and anyone who’s ever survived in a large organization knows exactly what management really is. Management is the ability to make your boss happy with what you’re doing -- in other words, doing what he tells you to do appropriately and not disagreeing with him in any way, shape or form. How do you rate management? By how much they’re getting paid? Does that make them good at dealing with uncertainty -- which is what they have to deal with? The real rating of a management is not the people; it’s the statistical performance, the fundamental value that has been produced by the company. Someone Wall Street rates as a good manager could be driving the company into the ground, but Wall Street could see their aggressive behavior as something they like to see in a manager. I don’t know.

My only concern about a management is if there’s a profit on the bottom line, that’s what I’m looking for. Any manager that produces a profit of any kind is somebody that I feel is doing a good job. I’m not looking at how well he handles himself on the cocktail circuit, I don’t care how much money he makes, I don’t care how many boards of directors he sits on or any of those other types of credentials; I don’t care how fast he’s risen to the top of this company or what sex, nationality or anything else he is. I just care about three things: this company had better pay me a dividend, it has better remain profitable and it had better fluctuate a lot in value so that I can trade it.

TWST: A lot of money managers I talk to regularly are in a wait-and-see mode, waiting to see if the economy is going to be sluggish or double-dip or whatever. What are your views?

Mr. Selengut: I’m not an advocate of wait-and-see. I don’t think that’s a decision. I think that’s a non-decision -- and I’m a decision-maker. I feel that, whereas some companies may be impacted adversely by an economic downturn, there are others that are moving along favorably. My business, for example, and I’m in the financial industry, has been very, very good, probably because of the record I’ve achieved over the last couple of years. But there are other people who will say just the opposite. If I had my druthers, there are people whose businesses would be discontinued totally until we had a mutual fund industry that got its act together and got back to a reality-type situation instead of the one-size-fits-all-boutique style that it has today. Wait and see just doesn’t cut it if you believe, as I do, in dealing with perpetual uncertainty? I don’t know, I’ve always been an action-type guy, I guess. And I see opportunities today, and I’m willing to buy and sell securities on a relatively short-term basis. Most money managers are dealing with the mutual-fund-product-type scenario that I criticize so vehemently. I’m not sure why it’s wait and see. How are they going to know, unless by looking in their rear-view mirror, when the economy turns around? Are they going to wait for the statistics, which are adjusted each month for the previous month? Isn’t that too late?

Again, when it comes to investments, people are always buying high and selling low instead of the opposite. And I contend that using the methods that I put forth you can turn that around, put yourself in sync, start buying low and start selling high again. That’s how it was originally designed, I believe! Wait and see is not an investment strategy.

TWST: Investors, over the last few years, have been deluged from every aspect of the media. How do they deal with all that?

Mr. Selengut: I think analysis paralysis sets in. I remember when I first started investing, there was no such thing as a financial talk show, there was no CNBC, you had very little information -- but somehow it seemed a lot easier then. You had very few mutual funds to choose from. Now there are more mutual funds than there are common stocks. It’s just incredible how much the media has gotten involved in the investment world and how much the individuals have gotten involved in that regard as well.

Everybody now is a shareholder. In the old days, stock market investing was for the rich, but once we started with the 401Ks and the IRAs and the 403Bs and all these other new educational things that are out there, it was inevitable. The sad thing is that they have forced people into investing in mutual funds. Still everybody is in the stock market, so you would think that Americans would be able to connect the dots and understand the vested interest they have in the success of corporations!

Consequently, everybody in the media wants to have an expert on their staff to talk about the stock market. There are people who spend their entire day watching CNBC. In my book, I tell them, “If you insist on watching CNBC, turn the volume off and just look at the tape, because you’re only going to get confused.” Then the newsletters. How many hundreds of newsletters are there out there that people subscribe to? Can anyone stick with a strategy long enough to test it? And then, everybody and his brother has a software program that’s going to make you an investment genius! Well, all these things fell flat on their face, right? In the last three years nobody made any money, and the reason they didn’t make money was because they all had this pie-in-the-sky attitude that they were smart enough to predict the future. They knew that the old economy -- the bricks-and-mortar-type companies that actually produced products and had goods and services and had a bottom line that was profitable -- that was not the way to go anymore. They were convinced that they were right, and they put all their money -- literally, all their money -- in companies that had never turned dollar-one of profit -- and just like they do at Atlantic City or Las Vegas, they got burned! And they took most of the 401(k), IRA and 403(b) investors with them! Because the Mutual Fund industry has a monopoly in the qualified plan area. Now there’s a place for change.

TWST: What are your thoughts on active management such as you offer versus passive indexing?

Mr. Selengut: I’m probably the only one who is critical of the index fund and things like that. I used to think that the indexes themselves were valid barometers of either the stock market or the economy. But once you start playing futures games with these numbers, you have hundreds of fund managers who must go out and buy Cat’scradle.com just because it was added to the NASDAQ Index or the S&P -- nothing to do with its viability, its profitability, its management, if you will, but just because of the index that it’s in! It’s just not based on investment decisions. It’s based on future predicting. What’s going to happen with the S&P Index over the next 12 months? Should we invest in that Index instead of trying to select stocks? Well, when you buy an index you’re buying companies that are on the verge of bankruptcy and you’re buying others that are at their highest levels ever -- you’re going for what’s average instead of looking for good companies or making good selections. I think it’s a bad deal all the way around. I don’t think indexes are worth the powder that would blow them to you-know-where!

TWST: I know you’re not a forecaster, but what are you worrying about? Any concerns in the big picture?

Mr. Selengut: Yes, I’m concerned about war. I’m concerned about terrorism. I’m concerned about mistreating children. I’m concerned about all major issues, I guess, that a thinking human would be concerned about.

What I’m not concerned about is future prediction. I’m not a fear monger. I don’t think that the United States is going to go out of existence just because we have a few terrorist cells that might set off a bomb someplace or other, or that we may misguidedly choose to go to war with somebody. I don’t think that’s going to ruin our economy or our stock market or anything else. We survived two world wars, for god’s sake, and I don’t think we’re in a position where anything like that is going to take place anytime soon.

I just don’t see as much fear, doom, and gloom out there as a lot of people want to see. And I wonder how much all those emotions are being manipulated by Wall Street and other streets -- the government, for example -- to get their agendas taken care of. I just don’t know.

TWST: Is there anything that you’d like to say about Sanco Services and what it has to offer investors as opposed to other peer companies?

Mr. Selengut: “Peer companies” is an interesting idea. I’m a very small investment manager, and I don’t have any relationship to anybody big or anybody that has any products that are delivered through me -- because there are no products. It’s just individual management on a personal level. Consequently, I have no choice but to remain small, if I want to keep myself that way. In other words, I can’t manage money for everybody. I can manage money for maybe 125 different people, Otherwise, I would get bogged down in paperwork and not be able to ever play golf or have a conversation with my wife or my grandchildren, and that wouldn’t be any good.

So that’s the reason why I wrote this book called The Brainwashing of the American Investor. That book can help any individual to (a) go out there and run his own portfolio intelligently and with an idea of what’s going on in the stock market, or (b) if he doesn’t have the time to do it himself, at least know what questions to ask of the providers of financial products and services that he comes in contact with.

Sanco Services is a unique beast. It’s a small one and it’s going to stay small, and I would really love it if there were 1000 Sanco Services out there with other managers who had the same rules that I have. In that way, people could be helped out of this mutual fund morass that Wall Street has put them into.

TWST: And what would you say are your goals as a money manager? What do you want for your clients?

Mr. Selengut: I want to be able to grow my clients’ capital at a rate of around 10% a year forever and to make sure that I’m here for them to change their allocations appropriately to meet their needs as they move through their financial lives to make sure that money is there to pay the monthly bills when they get to retirement age and to make sure that money is there for their children’s and grandchildren’s education when they want it to be. I want to continue to keep their money safe and to protect them from the hype and the speculation that appears periodically on the Street. That’s my job!

I think we’ve touched all the bases: we’ve covered what my requirements are for investments and how I don’t like investment products and how I don’t think one can really measure managements the way Wall Street wants us to think they can and so forth. There are a lot of problems out there, but there’s a lot of opportunity. And though we may be in what people want to speak of as an economic downturn, those things are always something that we’ve gotten through.

TWST: Thank you, Steve. I think you end your book with a strategy statement you call “The Investor’s Creed”. Would you share it with us? (PS)

“My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation. On the other hand, every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately. I am happy when my cash position is nearly 0% because all of my money is then working as hard as it possibly can to meet my objectives. But, I am ecstatic when my cash position approaches 100% because that means I’ve sold everything at a profit, and that I am in a position to take advantage of any new investment opportunities (that fit my guidelines) as soon as I become aware of them.”

*Managed~Asset~Allocation ~ Sanco Services, Inc.* ~ Market~Cycle~Management**
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