First Quarter 2007

America is abuzz with talk foretelling the dismal future of Earth. It is as if H.G. Wells's Time Machine has just returned from the year 2107 with horrible stories about the soggy remnants of human civilization and to warn us to change our ways before it's too late.

Ecology, the study of the inter-relationships among species in a given environment, was a seldom-used term forty five years ago when I was in high school. I had briefly thought about a career in marine ecology. My bedroom was overflowing with fish tanks and books about things aquatic. My folks were not amused. One summer day, to satiate my curiosity, my mother drove me from our home in Worcester to the Marine Biological Station at Woods Hole. It was then a much smaller organization with a few buildings cobbled together, enduring minimal funding. Happy to have made the pilgrimage, I then checked out the Worcester Public Library. They owned only two books on marine ecology- mostly words; no pictures of glorious coral reefs and brilliant tropical fish. Ultimately I followed another muse, the one that offered me a scholarship to study music. My interest in the natural world lives on through the American Chestnut Foundation, gardening and a few other group efforts.

In the forty five years since my visit to Woods Hole, billions of dollars have gone not only into marine research but also into the study of the entire planetary web of life that sustains us on Earth. Scientists are now gaining knowledge at a geometrically expanding rate. An informed reader of the daily newspaper today knows more about the natural world than the scholars of Natural History understood 200 years ago. President Thomas Jefferson sent Lewis and Clarke out in 1803 to discover for science and government what lay over the mountains to the west. Today we plumb the deepest gorges of the oceans and seek to understand the coldest, the hottest, the wettest, and the driest parts of our small blue planet. We are beginning to understand how Earth works as a unified but complex system of life support. We are also starting to grasp the significance of the Law of Unintended Consequences. What happens over there may impact what happens over here.

Just as we are all invested in the sustainability of the air and water on our shared orb we also share a common interest in an important human activity, productive work. At times our productive work conflicts with the natural world. We want wood floors. Trees are cut down. Are they being replanted? Trees are 'carbon sinks' because they take in carbon from carbon dioxide, a greenhouse gas, and sink it into the body of the tree.

We need trees but we also need money which we get from work. Without our shared inter-dependent productive work, we'd all be back in the Stone Age, catching and growing our own food, fending for ourselves, surviving by our wits and luck. Now, I ask, could our Hollywood matinee idols survive without their mansions, maids and various pampering attentions? Could they spare a square? I, for one, am grateful for clean water, good food, a home, medical care, the ability to earn a living and to share this bounty with my friends and neighbors living in a free land. There are, of course, problems. We want to drive our cars so we set a fire under pressure inside a block of metal with moving parts to explode fuels that originated millions of years ago in a humid swamp. This chemical process produces energy and by-products which we all agree are not good for us. Hydrogen-fueled cars exist. Water vapor is their only waste. They will be common as soon as the technology is refined. Until then it's gasoline, a pollutant.

The future will arrive with or without us. What we do as a population of over six billion souls will affect our home planet. Those of us in the industrialized world are catching on to the environmental costs of progress. Many in the emerging economies have not or can not match our efforts to clean up shops, offices, power plants and homes. The recent history of Homo sapiens, the dominant species here, argues for a course which will correct errors and solve problems. You wouldn't believe that if you got all of your information from the doom and gloomsters in the news business. The news media, as I have so often said, report mostly bad news. A madman commits an insane act of evil. On the same day three hundred million other Americans did not do such a thing. The madman made the news. The rest of us did not. The news business is the Bad News business.

Science has given us a glimpse into the magnificence of the natural world. Biological ecology and financial ecology follow similar rules. In finance as in nature, each individual thing or event may have an effect on other things or events. Take taxes, for example. If a government raises taxes, some productive capital is transferred from one financial river to another; from the private sector to the public sector in this case. It may be a good transfer or a bad one. In either case, the transfer affects the inhabitants of the environment, those who are taxed and those who receive the tax income. In biological terms taxation is a protoplasm transfer, like that which occurs when one animal eats another.

Here's another example. Let's say you have a company that makes things. You've just improved manufacturing efficiency so you can lower your prices. More buyers enter the market for your product. Now you have more money in your pocket to spend on things or services you want. If you get greedy and raise your prices your market could dry up. Buyers might return when there is equilibrium between supply and demand; between price and willingness to spend that amount. The market acts as a natural force. The strongest survive. Darwin was right.

Cut down a tree and young sprouts fill the void in the forest. A business fails. Other competitors move in to claim the market space left vacant. Raise import tariffs on foreign imports and prices have to go up or the seller must sell at a loss, something that results in death in nature.

An animal can survive on stored fat for only so long. A company must make a profit or be sold to other new owners or simply go bankrupt. Go into a diner and look for a sign that says "If you guys don't eat we both starve." I heard there is one somewhere. This is how it is with nature and with economies. Everything is inter-related. Trees need bees for pollination. Bees need trees for their hives. Buyers need sellers. Producers need consumers. Stop the process and the system will decay.

The single individual counts. Without the members of the microbial world there would be no world as we know it. Microbes, very small single-celled organisms, break down complex wastes into usable nutrients. The individual buyer at the grocery store is supporting a global economy when he or she buys oranges. Bacteria are the cleaning agents of the forest and the ocean. A single purchase by a single buyer has an effect on the entire market.

Variables in nature are as many as the number of plants, animals and natural forces on Earth. At this time we can measure some of the larger forces and project an estimate of some of the effects of certain activities. Science is a young pursuit. The "Scientific Method" approach to understanding the natural world emerged during the 15th Century. It's tough enough to predict next week's local weather. Predicting future global climate change presents a greater challenge.

Global financial wellbeing is dependent upon the sum of all of our economic parts, just as our survival as a species and civilization is dependent on all of us co-operating to solve our common problems. Our shared future will depend on all of our individual decisions as well as our shared efforts. The natural world is revealing its complex secrets and wonders. The economic world is also a many-faceted gem. You don't have to be a professional economist to understand that we are linked one to another by our efforts, our work and our shared responsibilities. There is no "them and us" in the global economy. It's all "us." From the micro to the macro, a healthy natural world and healthy economic world are required for our survival.

Investors are taking a cue from the scientists. They are thinking globally. Americans are perhaps 5% of the population of the entire world. China has about 1.3 Billion. India has topped 1 billion. That's a lot of people. By contrast we are only 300 Million. Our economy, however, is so advanced that currently we consume a proportionately high percentage of the available energy. In the near future Americans will come to realize that setting fire to petroleum products is unwise. Vast windmill farms will be built. Nuclear energy will again become, as it is in France, a major source of electric generation. Solar, tidal and biological fuels from renewable resources will gradually replace oil obtained from people who don't like us.

Investment themes that look forward include problem solvers. Here's a brief list of some concepts: 1) Clean Water; 2) Alternative Energy; 3) Healthcare; 4) Global Finance; 5) Technology; 6) Renewable and Recyclable Natural Resources; 7) Engineering and Management Specialty Firms.

Americans can pick from among the tens of thousands of public companies, thousands of funds, who-knows-how many bonds, about nine thousand banks and three thousand or so life insurance companies for investments and savings. Pick the best one. I wouldn't have a clue about "the best one" but I have several on my list of most-favored choices. What- ever the choice, the investments must be suitable for the investor. The financial advisor must match the investment portfolio to the client. Your portfolio should be a collection of compatible individuals, like fish in an aquarium. They should serve your purposes as greens from the garden in your salad and should work together in a way that is healthful for the long-term as trees in a healthy forest.

An investor or advisor can no more predict the future than can the weatherman for next year. We can be prepared for whatever storms may come; for sun or rain; wind or calm. For high interest rates or low; for high inflation or low; for international calm or war; for whatever comes our way. Americans have made enormous strides in cleaning up the pollution of the past. We Americans also have a high standard of living which can be maintained by adapting technological solutions to today's problems. The future is not bleak. The time machine will not, in my opinion, come back with grisly news of a sodden civilization. Together we have solved big problems before. That same spirit is alive and well today in America.

As partial proof I'll briefly report that the Dow Jones Industrial Average closed above 13,000 a couple of days ago on good first quarter earnings. Employment numbers improved, dropping our national unemployment rate to 4.4%. Interest rates are fairly stable. Many companies have announced stock buy-backs, a good sign. Europe is experiencing a fairly good run. China continued its torrid pace of growth. Of course, nothing goes up or down in a straight line. What zigs today can zag tomorrow. Investors are not traders. Warren Buffett said his favorite holding period was forever.

Enjoying financial health allows one to pursue the needs of the soul. One of my friends, Brenda Silva, a well respected Provincetown artist and someone I've known from1980 when I was in the Lower Cape Concert Band, will be showing some of her works at our "ART and the ART of FINANCIAL PLANNING" Open House here in our Orleans office on Saturday, May 19th from 1 until 5 PM. I'd love to have you stop by. Enjoy Brenda's paintings, her daughter Brianna's live music and her daughter Brett's hors d'oeurves. Rick Pike will be here to answer questions about the new Massachusetts Health Insurance Connection Law. I'll be here for questions about investing and financial planning.

Bring your family, friends and neighbors. I look forward to seeing you.

Robert W. Brimmer, CFP™

BRIMMER FINANCIAL
rbrimmer@nationalsecurities.com
P.O. Box 2806 - 19 Brewster Cross Road - Orleans, MA 02653
tel. 508-240-0320 fax 508-240-2309 toll free 800-237-9322
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