There is a prevailing wisdom in the marketplace which differs greatly from The Lakeside Perspective. Among common speculation, you may hear:

• “Gold values will only go higher.”
• “Oil will be at $150 per barrel within a year.”
• “The U.S. dollar is worth very little and Europe is the new center of capitalism.”
• “Real estate has been a debilitating drain on the net worth of the American Investor.”

Based on Lakeside’s experience, we respectfully disagree.

We acquired gold for our clients in the summer of 2006 at $568 per ounce. On March 17, 2008 we sold our gold holdings at $988 per ounce. We believe the majority of the gains are behind us. Gold may rise, but the risk that it falls weighs greater.

The U.S. dollar has declined heavily against other currencies for several years. Our buying power is half what it was a decade ago against the European currency. That affects what we pay for all goods outside the U.S. We believe that the dollar will stabilize against foreign currency over the next five years.

Oil pricing has loomed large in the current battle against food and energy inflation. Fuel prices affect what you pay for food more than any other cost. Diverting corn production away from food and toward the creation of ethanol will go down in history as one of the greatest energy blunders ever supported by congress. This mandate has proved itself to be expensive and certainly did not control gas prices. Gas prices are high because of record demand, but also because our federal, state and local government fuel tax now comprises a larger portion of the price of fuel. Bio-diesel is a profound idea, but along with its environmental benefit comes the high cost. It is unlikely bio-diesel will ever become less expensive per gallon than gasoline.

Oil prices will come down only one way: falling demand. Falling demand will only occur if worldwide growth slows. At Lakeside, we expect to see $80 per barrel oil prices long before we see oil at $150 per barrel. In the meantime, we will keep our current position in oil stocks, which is very small.

On the real estate front, while most developers are suffering along with the banks that finance them, Lakeside stayed away from the development of real estate in favor of existing hotels, shopping centers, office buildings and retirement homes. Now, we find ourselves in the enviable position to search out distressed properties that can be acquired for a fraction of their previous value. Our expert partners in these sectors have now purchased undeveloped land parcels in the Southwest that can be acquired for one fourth of their potential sales price. Notably, in most cases, we are purchasing these assets all cash with no loans. These real estate investments will sit in our clients’ portfolios for three to five years, when we expect to be able to sell them to national home builders. The important point here: Had we made land purchases at the wrong time, we would not have the resources to benefit from the decline.  Today, Sam Zell, one of America’s sharpest real estate investors, stated that he sees real estate investments accelerating.

While the media covers what has happened, investors should be looking to what will happen. All of these decisions affect you and your net worth.

Yesterday, I had a nice dinner with a group of close friends. The conversation I had with them prompted me to share a few thoughts with you, and the other clients and friends of Lakeside.

One of my dinner companions is a client of a major private-wealth management firm. His investments were substantial, and he shared with me the rather dismal state of his portfolio, which has dropped more than 30 percent in recent months. He shared that his advisor - a founder of the firm - began acquiring AIG about six months ago when it was trading at $58 per share, and was now selling stock to reduce his exposure.

He went on to tell me that for years, he’s asked his advisor about diversifying into real estate, to be told that real estate wasn’t a viable investment for him because: “there was no money in it” for him.

I had a number of emotional responses. First, I felt my friend’s pain, but aside from pouring him another glass of wine, there was little I could do to help him feel any better. I also felt angry - I knew his advisor, and I know he owns real estate throughout the world, clearly understanding the benefits of investment-type diversification.

In contrast, today I met with a Lakeside client. He splits his investment portfolio between Lakeside and a well-known advisory firm here on the West Coast. In our review, I outlined our performance and shared with him the portfolio declined 4.38 percent over the trailing 12 months, ending November 7, 2008. The day before, he met with his other firm and heard his portfolio with them is down 28 percent from the beginning of the year. Parenthetically, that firm now recommends he liquidate the smoldering embers of his remaining mutual funds to prevent further losses.

Aside from thumping our own chest a bit about the success of our approach, I think there is another important message here: more often than not, the large investment houses have shown a pervasive lack of leadership in understanding risk management. Call it group-think, reliance on “conventional wisdom” or just poor risk management, but we believe that in a growing number of situations, investors are falling prey to the same machinations that have reduced portfolios to rubble in every recession and depression our country has faced.

We believe this environment requires bold thinking, time-tested strategies and a keen understanding of risk management. Our firm works to accomplish these goals for each investor we advise and each new investor we meet. True wealth management — with an eye toward capital preservation and net worth growth — can only flourish when one is willing to challenge conventional wisdom.

I share these thoughts as a way to illustrate the Lakeside difference, and as always, I welcome your thoughts and comments.

This has been a historic week. Partisan politics aside, it is one of those moments that give us pause about our country, and our fellow countrymen and women.

We were reflecting on this and thought that as one of our clients, you might be interested to know the type of company you keep.

Here at Lakeside Capital we are fortunate to advise clients of all types. While the majority of our clients live here in the verdant Northwest, we also have clients who live in virtually every continent and some who work around the world.

Our clients are diverse in other ways also, age for instance. We have clients who are not old enough to vote in today’s election, and those who lived through the Great Depression. They include retired investors and young entrepreneurs. Some of our clients are stewards of wealth passed down four or five generations, and others are forty year olds who did extremely well in our tech sector, accumulating new wealth. We have clients that give the fashion designers in Milan a reason to live, while others think that wearing socks with their jeans is haute couture.

We have clients that think that a 12-hour workday is working half-time, and we have clients who have handed in the key to the executive washroom in exchange for a seat on a non-profit board. One couple we represent has devoted themselves to domestic violence issues and the study of astronomy, while another client finds happiness in hunting bear from the back of a snowmobile in the outback of Alaska. Our clients also include bankers, beer distributors, surgeons, music producers and Pilates instructors.

We advise CEOs who travel the globe operating huge business enterprises, and an athlete whose quests include finding gaps in the defensive line and ways to convince at-risk youth to stay in school and on the straight-and-narrow. We work with grandmothers who are paying for college for their grandchildren and grandmothers getting their degrees themselves. We work with those who have concluded there is no God, and those whose life’s work is spreading the teachings of any number of Supreme Personal Deities.

Our clients include just about anyone’s definition of family, from split families, blended families, divorced families and those who have opened their homes to those less fortunate. Our clients include couples married for more than a half-century, and those who are — according to census definitions — practicing co-habitation.

So, what does this have to do with investing, the market, or our work at Lakeside?

From our perspective, it is critically important. We’ve always done our best to be completely open-minded. That means understanding that the mindset of a CPA is probably different than the mindset of a PR agency owner. Heck, it means that two CPAs could, and probably do, have a completely different mindset and value system. Only by taking the time to learn about each of our clients, who they are and what they hold as important, can we be successful in serving their needs. By this means of discovery we became more intelligent and successful in our work.

What is interesting is that business schools don’t teach this. Merrill Lynch, UBS or Morgan Stanley doesn’t teach young, freshly minted brokers the importance of relationships and the value of listening and learning from those around them.

When we do ask people about what makes them tick, we often take cheap-and-easy shortcuts. We default to politics or religion, thinking those bellwether issues will give us quick insight. More often than not, those conversations immediately bring up walls that preclude learning. Go a year without bringing up either one and watch your own knowledge expand.

You may not know it, but we discriminate at Lakeside.

Before we agree to sign a client, Jeff and I need to be convinced of two things: First, that the client offers a positive influence. We firmly believe that every person has the potential to be a positive or negative influence on those around him or her. We are only interested in working with the former.

Our second prerequisite is that our clients need to have a demonstrated respect for others. Our clients expect that we respect them, and in turn, we expect it of our clients. We created this bright-line rule years ago when Lakeside was a much smaller company. We had a potential client come to us with more than $100 million to invest - an amount that would have leapfrogged our growth. The only problem was that the potential client was so unctuous and unsavory; we felt the need to wash our hands every time we met him. We ultimately turned him down and haven’t regretted that decision for a second.

So, what is the point of this long, arguably verbose, polemic?

It means that Jeff and I are fortunate to have you as a client, and we are thankful of the diversity of Lakeside roster. We are better people for it and hope you see benefit in it as well.

Moreover, we hope that as you read this, you may decide to involve yourself with a person whose background isn’t similar to yours, as we’ve done at Lakeside. By doing so, we believe you will come across someone who makes you smarter, wiser, more successful or more diverse. If that is not a good enough reason, then know that what you learn just might make you richer.