Wells Asset Management
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Our History

About Us and Our Mistakes

 

Our goal is to help you maximize your financial security/opportunity.  Normally in money management, a client essentially chooses between prudence and performance – risk and reward if you will.  We think we have a reproducible algorithm that produces both prudence and performance. 

 

We cut our teeth in the stock market by using $500 that we had saved from our paper route in the eighth grade to buy 12 shares of Alpha Portland Cement during the great Interstate Highway building program in the mid-fifties.  The next day President Eisenhower had his first heart attack and we eventually sold the stock after taking a 90% loss.  Mistake number one, but it was certainly not our last mistake.

 

After studying economics, mathematics and computers at Albion College and the University of Michigan, I took a job in a trust department at a bank in Detroit.  I was the economist-mathematics gopher on a group headed by Fisher Black who was one of the pioneers in modern portfolio management.  Our team was the first group to actually calculate the betas which was a very hot topic on Wall Street in those days.  Parenthetically, we were the first group to prove that betas do not work.

 

We discussed many mathematical theories and their possible relevance to the stock market.  Fisher and I had many arguments over the Efficient Market Theory.  I simply said that it was not a question if I could outperform the market as an analyst or portfolio manager; rather the only question was by how much.  Oh to be so young and cocky again.

 

After running up many blind alleys with our computer work, I came to Boston and was one of the early employees with Adams, Harkness and Hill, an institutional research broker.  I had 34 very stimulating, enjoyable and rewarding years – one third each as a stock market analyst, director of research, and hedge fund manager.  I was always known as a good stock picker, but with some reflection I think the key to being a good stock picker is to be a good salesman and have the selective memory of a corner back in football.  Performance is difficult to measure, but at the end of the day, I fervently believe that we all revert very close to the mean. 

 

Retired or not, the stock market and the love of statistics remains very much a part of my being.  My first retirement project was to write “The Holy Grail of Money Management: ” which is downloadable on this site.  Despite my best efforts, let me in advance apologize for the lack of readability. 

 

Just because stock picking was not a reliable and reproducible way to outperform the S&P, there could still be other ways.  I always maintained during my career that I had the perfect market timing device; I just had to do the opposite of my stomach.  If I didn’t think I could miss, then I should sell every stock; and if I didn’t think I know what an attractive stock looked like, I should buy every stock.  In essence I was leaning against fear and greed.

 

While this “stomach” methodology was accurate, it was not quantifiable and thus not reproducible.  But I was attracted to the notion of measuring fear and greed for two reasons.  First, nobody else was attempting to measure these two key emotions.  Second, while the stock market over the long run will revert to its true value, fear and/or greed in the short term can take the market a considerable distance from its true value.  Under the assumption that trees do not grow to the sky and that the economic sky does not fall very often, measuring fear and greed and then leaning against the prevailing emotion does prove to be a reproducible way of adding performance.  In the rare but important case where the economic sky is falling, our insurance policies against fundamental bear markets could be worth their weight in diamonds.  After all of our mistakes and stumbles, we believe The Holy Grail that is presented on this web site will maximize your financial security/opportunity. 

“Us” at the moment is my son and my bride.  My son, Chip, has decided that the life of a professional fisherman is either financial rewarding but dangerous or financially struggling but fun.   Safety and financial rewards seem to be an oxymoron in the fishing business.  Chip is going to be in charge of all aspects of our marketing program.  My bride of 43 years is our Chief Liaison Officer.  As our daughter says, “Mom that means that you get to do anything that Dad or Chip does not want to do.”  If only my bride were that pliable, but she makes up for it with her talents and personality.  If we can be of any help, feel free to contact us at SkipWells@Verizon.net.

 

 

Harry E. Wells, III

January 3, 2007

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