Fall 2009 Newsletter

It has been a little more than one year since Lehman Brothers was allowed to collapse, triggering a wave of global financial panic, the likes of which three generations have not witnessed.  We will probably never know how close we came to economic armageddon and the corresponding nuclear winter that would have followed. 

 The actions and inactions of those that brought about “The Great Recession,” as it is now called, have been analyzed over and over again, and a common thread that continues to emerge is that “smart” people on Wall Street  as well as “geeks with calculators” were taking massive, (highly leveraged) risk with other people’s money.  As the greedy became even greedier, stockholder equity and client capital became increasingly compromised…. exposed to the reality of what always happens when leverage goes bad. 

Bear Stearns fell victim to its excessively leveraged position in March of 2008. Merrill Lynch disappeared over that infamous September 15, 2008 weekend in a shotgun wedding with Bank of America.  One week later, Wachovia, which had earlier in the year combined with the wonderful old firm of A.G. Edwards, was forced into a distressed sale to Wells Fargo. Three months after that, Smith Barney, the crown jewel of Citibank and a once great firm, was joint ventured to Morgan Stanley in an emergency asset sale, no doubt it was a necessary move to prevent the bank from failing. 

Remarkably, within the span of four terrifying months, three of Wall Street’s oldest and “strongest” firms were forced to merge, and one failed.  What is sad is that many innocent employees, shareholders and clients became the casualties of a few “smart” people playing recklessly with other people’s money.

When we started Cascade Investment Group in 1996, we had just come from that “big firm” Wall Street model where the distribution of “product” was becoming the “rule of the day.”  We knew that the model has serious flaws over the long term. We knew that there was a need and a placefor a small privately-held investment and financial planning firm that was client centered and specialized in independent and individualized advice. We knew about the dangers of a bad market and what would come about if we had put Cascade Investment Group capital at risk. 

When the tsunami of last fall hit, nobody on earth was prepared for the magnitude of the devastation.  We at Cascade Investment Group have always preferred to manage client assets with risk mitigation and market outperformance, as the primary objective in bad times, while confident that proper asset allocation will produce market like or better returns, during the good times.  In 2008, most all markets produced gut-wrenching returns not seen since the Great Depression and our Cascade investment philosophy was put to the test.  We lost money for our clients and ourselves, however, we feel that we worked feverishly, diligently and successfully to keep our clients away from the brunt of the disaster.  Today as the markets and the economy recovers, our clients, we believe, are enjoying the fruits of our efforts.  

We at Cascade Investment Group are very proud of our employees and our firm. Our commitment to our clients and their well being is at the center of our core values. We feel that the philosophy of “unbiased, independent, individualized advice” is a philosophy that all investors should have access to. We hope that you feel the same way as we have journeyed through the good times and the bad times together. 

If you know of someone else who would enjoy a Cascade relationship or could benefit from our services, we would appreciate it if you tell them about us.  As for our dear clients that we have worked hard for over the years……thank you for your loyalty, confidence and trust.