Why Dalton Financial LLC?

Our Perspective and Process

Wall Street institutions are famous for concocting solutions to yesterday’s crisis.  Along with complexity, the costs and fees grow accordingly.

It doesn’t have to be complicated.  We keep it simple, but simple does not mean what we do is easy.  We are driven by perspective gained in more than 40 years of successful investing experience, combined with years in corporate finance with Fortune 500 companies (Mobile phones, PC’s, Consumer Products and Specialty Chemicals).

Today’s market imbalances are the result of Government market intervention following the housing crisis.  These imbalances create risks that are not to be ignored, but choosing to manage rather than avoid risk is critical.  Even more important is how you respond to the opportunity created when risk becomes disruption.

We have been invested in the markets since 1972, and have studied business, markets and the economy ever since.

Start with a plan.  You can’t expect to end up where you want to be if you don’t define what you are trying to accomplish.  Most importantly, it is essential to define anticipated liquidity needs.  The greatest risk is having to sell when prices are low.  The way we manage this risk is to avoid it by maintaining reserves sufficient to fund liquidity needs within 3 to 5 years.  Even in the financial corrections of 2000 and 2009, the market had pretty much recovered within 5 years.  We can accept market risk with a 5 year time horizon.

What kind of investor are you?  What is the maximum equity allocation you can tolerate?  This question depends on several factors including temperament, liquidity needs, wealth, budget, life style, and flexibility.  An emotional approach focuses on how you might respond if the market goes down.  Our approach recognizes that the market will go down.  The real question is how long it stays down, and what you might need to sustain volatility without incurring permanent loss.

Take a lesson from Warren Buffett’s mentor.  One of Buffett’s professors at the Columbia business school was a gentleman named Benjamin Graham.  He wrote a book titled, “The Intelligent Investor”.  If you want to manage investments, this would be a good place to begin your study.  Perhaps the most important lesson is understanding that any investment is worth the (net present value of) the cash it can give you back.  This is known as intrinsic value.   The lessons and philosophy of Graham and Buffett influence on our process.

The role of Asset Allocation.  The goal of asset allocation is risk reduction, not wealth accumulation.  Consider that anytime you rebalance from equity to fixed income, you are increasing the average weighting of an asset class that lags equity over time.  That will lower average returns over time.  On the upside, it will lower volatility, helping you to stay invested with money you might need in the long term.

But Warren Buffett doesn’t buy mutual funds.  Buffett is known to observe that “Risk comes from not knowing what you’re doing.”  We believe that if you build a portfolio of well run, well capitalized companies purchased at reasonable prices, you will do well over time.  Most people do not have the time, knowledge or conviction to so this.  The reality is that most people do not even have the constitution to stay with such a strategy when volatility strikes.  Volatility can be managed to a degree with greater diversification.  For most investors, this means developing a core portfolio with conventional asset allocation principles.  Risk tolerant investors might prefer to include a sleeve of individual stocks (no expense ratio).  If you want a chance to beat the market, you need to own something other than the market.

Nothing fails like success on Wall Street.  When a strategy or product gets too popular, it is doomed to failure.  We keep it simple.  We are vigilant of market imbalances and have discipline to anticipate and tactically accommodate associated risks when hedging is necessary.