Definitions - Overview.

We going to start an occasional series on definitions of certain terms we use.  I've long felt this is necessary so investors can understand some of the concepts we discuss.  In a perfect world with a web developer for instance there would probably be a definitions tab at the top of this page where I could constantly update our terms. The world isn't perfect and posting online is not my day job so we'll have to be content for now with a series that we can link and update.

I constantly struggle with how to explain what we might be doing on a general basis without being too specific about on our current investment posture in client accounts.  I also in general prefer not to discuss what we might be buying and selling in accounts. In general we refrain from discussing individual securities. While I might at times indicate why I like certain markets or sectors, for the most part I'll refrain from talking about our individual holdings.  Only rarely will you see me say something like "today we bought (or sold) XYZ and here's why." Even then it will be only for illustrative purposes.

Here's why we do it this way.  Lumen Capital Management, LLC is in a highly regulated business, particularly as to how we communicate with the public. In general the SEC and the State of Illinois discourages and in many cases bars statements with inflated claims. That's why you don't see us writing something like "Wow we sold XYZ today---made 40% on that investment! Call me so we can discuss our next big winner!"  Regulators frown on that sort of thing, especially if it can't be documented.  In any case it's just bad business so we try to avoid any appearence here of doing it.

We also want to avoid any appearance of front running. That is we don't want to be accused of buying a security for clients or ourselves and then writing about it in the hopes that we can influence a higher price for that security. {Believe me not enough people read Solas! for that to happen-but we'll try to avoid that appearance anyway.} This is also why we will disclose long {or short positions} in a security if we discuss it by name in a posting.

The other reasons have to do with the nature of our clients. Solas! is designed solely for our clients as well as friends and future clients of our firm. This blog is a way for us to communicate actively with these groups. We are not a tip sheet nor are we interested in turning this blog into an investment letter at this time.  We want our clients and friends to better understand our market stance and we want to provide them a forum so they can be kept informed of events that might interest them. Investors who want to know the specifics beyond what we provide here need to become a client of our firm.

Finally most of our clients are individuals or family groups. Because of this we manage accounts based on the unique risk/return profiles of our clients. In general we do this by placing clients into five different investment categories based on our understanding of their investment parameters. Within each group there is also permitted a certain amount of customization in each account. As such we are concerned with how to communicate our investment stance in a manner that most accurately reflects what we might be doing at a certain point in time.  For instance in a market decline, a defensive posture in our most aggressive category of investors can mean more aggressive selling than we might attend in some of our accounts that are designated  more passive investment category such as an account set up mostly for income.

Having said this we are going to try and use several broad definitions for market posture going forward. This is our first attempt at this and we stand ready to either redefine or change these definitions if they prove to be inadequate to our task.