Elections, Recessions and the Economy

What are the basic premises which determine your investment portfolio? Is there a consistency to your thought, or is your portfolio a blend of ideas which may not agree with one another? How sound do your ideas appear when subjected to critique? This week we start a series on my basic investment premises and then see how those premises should perhaps inform your investment portfolios.

This series comes courtesy of an idea triggered by last week's letter. I was talking about a CIA researcher who was writing about the importance of subjecting the views of an analyst to intense scrutiny. I thought it might prove useful to my readers to review the basic investment themes and models which shape my own strategies, and perhaps offer some of the pros and cons about those ideas. We will let the devil's advocate speak up and see if we can deal with his objections.

To set the stage, let's review a few paragraphs from last week's letter.

"...But more often than not, what we think of as data 'proofs' for a certain viewpoint depend more upon our perceptions than the actual data. What happens is that we develop mental models. We take in information and process it according to our mental models, which are subject to our personal biases. The accuracy of any particular judgment depends…