Amen of the Week: “When there’s an ache, you want to be like aspirin, not vitamins. Aspirin solves a very particular problem someone has, whereas vitamins are a general ‘nice to have’ market. [The Netflix idea] was certainly aspirin.” - Reed Hastings, Netflix founder and CEO Fortune Magazine, “How Netflix Got Started” January 28, 2009 Few professional short-sellers can raise their hands and proclaim, “I have never been short Netflix.” Back in the mid-2000’s when I co-managed a hedge fund, I too had bet against the company. Briefly. The thesis for Netflix’s imminent failure was “elegant” in the words of my best analyst. Although the company had enjoyed success creating a DVD-by-mail business catering to the “long tail” of movie buffs with eclectic tastes, it was doubtful such artful connoisseurs existed in sufficient mass outside of cities like San Francisco where its early customers were clustered. Yet, even if the market did prove to be much larger, Netflix was sure to lose out to the big, bad Blockbuster, who had just announced (in 2004) that it would be launching its own DVD-by-mail service. And Blockbuster wasn’t messing around. It planned to invest $500 million (an amount almost equal to Netflix’s sales that year) to roll out its competing service. Besides, even without the Blockbuster threat, Netflix’s business model of mailing DVD’s was clearly not sustainable. Even back in the olden days of 2005 everyone knew that DVD’s would go the way of VHS as content would eventually go digital. But the cherry on top - what really got short-sellers like me excited - was that Netflix’s best customers were its least profitable. Its absolute best customers were likely even unprofitable. Despite these obvious negatives, the stock was trading at an “expensive” valuation. Who among you would not have been tempted to short this stock? Thankfully, I had the good fortune to attend a meeting in New York where Netflix management spoke to a room full of analysts. I remember looking around the room at my peers and smiling to myself, thinking, “I wonder if these guys have any idea that more than half the folks in this room are short their stock?” Then the CFO opened his remarks with, “Welcome shareholders, potential shareholders, and of course, short-sellers.” He proceeded to speak candidly about their business, addressing the formidable threats they faced. Rather than ducking the tough questions from short-sellers, he took them head-on – and did not even seem bothered by them. This was not how management teams typically dealt with short-sellers. They almost seemed to be encouraging the shorts to share their critical concerns. I was suddenly struck by something that I had never before experienced in my hundreds of such meetings: Could these guys be here to learn from their critics? After the meeting, I made a point to spend more time studying the people behind this company rather than myopically focusing on the business model. Who was this Reed Hastings guy? I learned that prior to his Netflix days he had proven himself to be not only a successful engineer-turned-entrepreneur, but a leader with a zen-like self-awareness and intense focus on identifying mistakes rather than covering them up or making excuses. I concluded that I could not risk betting against this guy. Thankfully my Netflix short-sale was short-lived. The stock is up over 17-fold since 2004. In retrospect, I wish my reasoning had extended from “I cannot bet against this guy” to “I need to invest in this guy.” But I just couldn’t believe that Netflix had a sustainable future given the inevitable demise of physical DVD's (its core business!). Then, the unthinkable happened. Hastings led the company through a complete change of its business model – from the physical to the digital. One of the classic “red flags” for a short-seller is a company that begins to change its business model. Hastings faced mega competitors like Time Warner and Charter as he charged into the digital world. How, then, did Netflix escape the demise that so many smart investors foresaw? It was not a grand business plan but a grand entrepreneur - one who built a tight culture of truth seekers who experimented relentlessly, studied and learned scientifically, and executed forcefully to deliver what customers wanted. Netflix shouldn’t exist. But it does – in spite of Blockbuster, in spite of the death of DVDs, in spite of all the competitors who should have crushed it. Netflix exists because of Reed Hastings. This is a reminder of why some founder-run businesses have such an inherent advantage. It is also a reminder of how innovators and their innovations will continue to improve our lives. As long as guys like Hastings choose to stay in (or come to) the US, I will remain bullish on our long-term prospects. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week: “Every single one of the premises on which we ran our company was wrong: centralized marketing, massive centralization of everything, massive specialization – it was all nonsense… Practice in the hard light of reality shows things. What do you do when you realize the theory is wrong? You change your ideals to make them realistic.” - Sir James Goldsmith, entrepreneur and legendary British investor (on his early challenges in business)* Yesterday I shared my thoughts on Brexit with our clients. I attempted to explain how this might be a good thing for selective and patient investors. You can read the note here. As a follow-up to Goldsmith's quote above, here’s another one that resonates: “When 90 percent of people are thinking the same thing, you can be certain that if you do exactly the opposite you’ll make a fortune. - Sir James Goldsmith* Yours in the Field, Frank Byrd, CFA * from Billionaire, The Life and Times of Sir James Goldsmith by Ivan Fallon; Little Brown & Company, 1991. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the week: “The myth that profit maximization is the sole purpose of business has done enormous damage to the reputation of capitalism and the legitimacy of business in society. We need to recapture the narrative and restore it to its true essence: that the purpose of business is to improve our lives and to create value for stakeholders.” - John E. Mackey, founder of Whole Foods (from Conscious Capitalism) In a video that went viral last week, comedian John Oliver delivers a hysterical – and informative – tirade on why people should insist on using a fiduciary adviser. As many of you know, I am on a personal and professional crusade to educate the world about the most important “F-word” in the dictionary. Utter the word “fiduciary”, and watch people yawn in your face. This is why I salute Oliver for making people laugh and learn why this concept is so critical to people’s financial health. His video has reached several million viewers, but that’s a drop in the bucket. Most remain woefully unaware of the inherent conflicts of interest most financial advisers have. Would you want your accountant to work for the IRS? Or your doctor to work for a pharmaceutical company? Of course not. Oddly, however, most Americans rely on advice from “advisers” who work for Wall Street firms, which in my mind, is essentially the same thing. Exacerbating this inherent conflict is how most are compensated. Nine out of ten financial “advisers” receive some form of commission from the investments they recommend.* We don’t call car salesmen “transportation advisers”, so why do we bestow fancy titles on financial salespeople? Here’s an eye-opening example: Think of someone you care deeply about as well as look up to – they’re successful, smart, hard-working. The only stipulation is that they are not well versed in finance or investing. Maybe it’s your mother. Now imagine this beloved person, having saved a nest-egg over the course of her long career, walks into a large brand-name financial firm to receive advice on how to invest her life savings. She sits down with someone who has “financial adviser” on their business card. The odds are very high that she will receive conflicted advice. For example, if your mother hands over $100,000 of her savings to invest, a traditional Wall Street adviser might make as much as $6,000 in commissions if he convinces her to buy an annuity … or $4,000 if she buys a mutual fund … or $2,000 if she buys a bond … or $500 if she buys a bank CD. The adviser actually receives between one-third and one-half of these commissions in their paycheck (the financial firm keeps the rest). This means he could make roughly $3,000 if your mother invests in the annuity or $250 if she invests in the CD. Hmmm. Think about that. The “adviser” could earn 12x more money for recommending an annuity over a CD. Said differently, he can either make enough to comfortably cover his mortgage payment or instead make less than enough to buy a month’s groceries. Can anyone honestly tell me that this is an acceptable conflict of interest? Would you want your mother investing her life savings with someone who is compensated in this way? The good news is that it doesn’t have to be this way. There are independent Registered Investment Advisers out there who work on fees only (never commissions), technically work for their clients rather than a financial firm, and are held to a fiduciary standard. Not surprisingly, these advisers are winning clients away from the Wall Street firms as the public wises up. But we’re still a minority. Only about 1 in 10 advisers fit this profile today.* Fielder is one such firm. Is your adviser a fee-only fiduciary? You can watch Oliver’s video HERE. [Warning to those of you with erudite, refined tastes: it’s racy. Yours in the Field, Frank Byrd, CFA *According to data from Cerulli Associates ** These numbers are for illustrative purposes only and do not refer to specific investments. They are rough estimates based on Frank Byrd’s observations from his experience in the industry. Commissions of specific products may in fact be higher or lower than these figures provided by way of example. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the week: “So many people told me it was not a good idea to start a restaurant, especially a fast-food restaurant. There was so much wrong with it—it was too spicy; everything was done by hand, from scratch. Everything was wrong. But that’s why customers liked it; it’s different, in the right way. If you have an idea, just go for it. If everybody is telling you that it’s wrong, maybe that’s an indication that it’s an original idea.” - Steve Els, founder of Chipotle (The Wall Street Journal, 9/22/09) If you’ve ever eaten at a Chipotle, chances are you fell in love. Since its IPO in 2006, the company has gone from ~500 to over 2,000 stores, and its stock has gone up over 10x. Last year, however, Chipotle experienced several outbreaks of food-borne illness – the first major food safety incidents in its more than 20 years of operations. The stock is thus down ~40% from its earlier highs. So the key questions are: First, is this a special company? If so, does this cheaper stock price offer us an opportunity to buy shares at a “good”, perhaps even “great”, price? As you know, Fielder is constantly hunting for special businesses run by special people. Typically, these are companies where the founder is still in charge. Here, at least, we can check the box on Chipotle: Founder Steve Els continues to lead as Chairman and co-CEO. It is not hard to believe that Chipotle should ultimately win back its customers' confidence, and with that, their foot traffic. Customers ultimately flocked back to Wendy’s, Taco Bell, and Jack-in-the-Box after their own food safety challenges. The bigger question is whether there is anything truly special about this business. Restaurants are notoriously tough businesses. Barriers to entry are low and customers are not sticky. In fact, they crave variety. The stocks of hot new concept restaurants can skyrocket, yet then crash as either customers tire of the concept and/or competitors ape the concept. (Remember Boston Market? … and Krispy Kreme?) Indeed, it was this bias that kept me from ever owning Starbucks. In reflecting on why I missed Starbucks, I keep coming back to one reason: Howard Schultz. This special founder was building a special company. By 2007, we all knew Starbucks was special but felt that we had “missed it”. Investors feared the big growth was over (in part due to a slowing economy), so the stock traded down 40% below its earlier highs. As it turned out, investors were right: Starbucks’ sales stalled for about 4 years. (Sales in 2010 – a full 3 years later – were up only 14% above 2007’s). But Howard wasn’t done building yet. He experimented with serving hot food in the stores, with selling Starbucks beans and pre-made drinks in groceries, with expanding internationally. Starbucks the company, as it turned out, wasn’t confined to selling a $4 cup of coffee in physical stores in urban locations. It was a real brand. And the brains (and heart and soul) behind this brand was Howard. He was relentlessly experimenting to discover great customer experiences. And then he could execute. Well. That's why the stock is up more than 5-fold since the end of 2007. (It’s up over 10-fold since the doldrums of 2009.) So much for secrets. Recall from my earlier note “Starbucks Shouldn’t Exist”that I missed owning Starbucks stock. The reason was that I mis-framed the company. I perceived investing in Starbucks back then was investing in a fad restaurant chain, rather than what it really was: investing in Howard Schultz. The older I get, the more I realize that investing in a company is actually investing in its people. Some are special; most are not. And so … is Steve Els special? His performance to date with Chipotle suggests he might be. But that alone wouldn't make Chipotle a good investment. Remember, there are 3 ingredients to a good investment: people, business, and price. As for business quality, I remain a skeptic that Chipotle is anywhere near as good as Starbucks. Any hot new restaurant concept faces competitors coming out of the woodwork to copy the model. Chipotle sure has. It was unique, but it was copy-able. Starbucks too was copy-able, but what many missed (I certainly did) was that Starbucks had a degree of customer “stickiness” uncommon among typical food service concepts. It does, after all, sell a legal stimulant. Chipotle’s food is famously good, but it’s not that addictive. Few go in every day to get their Chipotle “fix”. Furthermore, it is unclear the magnitude to which the company’s famously strong unit economics will suffer from the new food prep and sourcing changes recently adopted (to prevent future food illness issues). Finally, there’s price. Chipotle is cheaper today, but it’s nowhere near as cheap as Starbucks was in late 2007 (CMG today trades at almost double the sales multiple that SBUX did back then). If you (or someone you know) has experience in fast-casual restaurants, we would like to compare notes on Chipotle’s potential from here. Let me hear from you. We’re trying to figure out if Chipotle and Steve Els are special. If so, perhaps this hints at why that might be: “We're not best in the world at burritos and tacos. What we're best in the world at is building a people culture, sourcing really great ingredients, cooking according to classic cooking techniques, understanding the corresponding economic model and how to tweak that and drive that and provide this really great, new fast food experience. That's what we're best in the world at.” - Steve Els (Fast Company, 10/14/14) Yours in the Field, Frank Byrd, CFA Note: The above does not constitute a recommendation for any stock, especially for Chipotle or Starbucks. Either or both of these stocks could prove to be very poor investments in the future. This note is for informational purposes only. Fielder's employees or its clients may hold a position in some of the stocks mentioned herein. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Most of my clients in the early 1990s thought the world was ending. I had just arrived at Merrill Lynch fresh out of college, just as Bill Clinton had arrived in the White House fresh out of Arkansas. My clients thought he was a socialist, especially when his wife started talking about healthcare. America at that time was still licking its wounds from the late 1980's implosions of the stock market, S&L’s, real estate, and emerging markets. No doubt about it: the world was ending. Any reasonable person could tell that. You would have sounded like a moron in 1992 if you had been telling your friends that America’s greatest years of innovation and growth were about to begin. Sound familiar? How many intelligent people have you heard say something positive lately? Well, the world’s greatest investor, Warren Buffett, just did in his annual letter. Notably, Mr. Buffett has accumulated his fortune thinking differently. And this is refreshingly different … Amen of the week: "It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history… America’s economic magic remains alive and well. Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate… But in a single generation of, say, 25 years, that rate of growth leads to … a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children. Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do. Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry. The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve. Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.) For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” - Warren Buffett 2015 Berkshire Hathaway Annual Report Maybe Buffett is wrong. Maybe the future is not so bright. Regardless, I believe that we are better served investing with the eyes of an optimist. As I wrote in Fielder’s most recent investor letter, "Ironically, the best way to protect yourself against this pessimistic outlook is to adopt an optimist’s attitude. Yes, there is an assault coming upon owners of capital. Your best defense, though, is a strong offense... Aim to own the greatest quality income-producing assets you can. Wake up each day hunting for great things... The key here is to “own it” – having real equity in things you understand... Between now and then, the market price of your shares will have fluctuated – at times violently. But in the end, you’ll likely have preserved your relative wealth and buying power." Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week: “You have to say no to your friends to say yes to your work… What are you going to do … lose that idea because you decide to have a drink with your friends?” - Lin-Manuel Miranda, creator of the new Broadway hit “Hamilton” (Wall St. Journal, April 6, 2016) Magic Odds A few weeks ago I spoke to a class at Columbia Business School. I gave a fun little demonstration of how our odds of success can be far different than we’d assume. I asked a student to name a card and proceeded to correctly name it. This wasn’t a magic trick. I honestly predicted her card correctly. But my odds weren’t 1 in 52. They were closer to 1 in 2. You can learn how in this 2-minute video excerpt … The point that I was trying to communicate to the students is that our odds of success as investors are not necessarily what we might presume. There are roughly 2,500 liquid US stocks in which you can invest. However, the odds of one of these stocks being a successful investment are not evenly distributed. Yes, the market is highly efficient, but not perfectly so. Some stocks have historically proven to have had better odds of success than others. Small stocks, for example, have done better than large stocks, and low-expectation, or “value”, stocks have done better than high-expectation, or “growth”, stocks. But we need to be careful. Just when we think we’ve found a strategy that tilts the odds in our favor, we might be naively adopting one that does just the opposite. Investing has a way of confounding the most logical of thinkers. Statisticians can make dangerous mistakes by extrapolating past patterns into the future. Human beings determine securities prices, and humans are … well … human. They’re not robots. Their behavior and nature can change over time. This is why Fielder remains a healthy skeptic regarding investment strategies that are overly-quantitative – especially those that seem to have done so much better for so long. Consider my magic card trick example in the video. Assume that this video goes viral. (Ha!) If it did, all students would know the two cards that I’d assume they’d pick. Next year if I were to give this same demonstration, my odds of correctly guessing a student’s card would be far less than 1 in 2. They might even be less than 1 in 52. This is why we want to avoid investing blindly in what worked well yesterday. Circumstances and human perceptions are constantly evolving. As a result, market prices – and hence our odds of success – are constantly evolving. May we thus remember to think ahead, not in the past. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

In honor of March Madness, here's a re-play of one of my favorite notes. It explains important parallels between your bracket strategy and investing. (I’ve made a couple of edits to improve/update last year’s original.) How Buffett and Bogle Would Have Played Your Office Bracket Imagine that investment legends Warren Buffett and John Bogle were your co-workers and participated in your office March Madness pool. What strategy would they have employed, and how would it have differed from your typical co-worker’s approach? First, let’s take a look at your co-workers’ approach. Chances are most filled out their brackets based on what they heard from the “experts” in your office or on TV. Some might even have spent money to sign up for tips from an expert online. Bogle would have scoffed at wasting money with experts, since he believes that markets are perfectly efficient, making it pointless to try to beat them. He would have simply consulted the National Bracket, which aggregates all the brackets submitted to ESPN’s website. This is the indexing version of placing your March Madness bets. Assuming your office is large enough and sufficiently diverse, its bracket would have been roughly in line with the National Bracket. As a result, Bogle likely finished in the middle of the pack somewhere. Though he surely wouldn't have won the pool, he wouldn't have been shamed finishing dead last in the office. Buffett, on the other hand, would have taken a totally different approach. He knows that markets, whether they’re sports betting markets or securities markets, are highly efficient, but not perfectly so. While they often reflect the madness of crowds, they occasionally reflect the madness of crowds. Like Bogle, Buffett would have consulted the National Bracket as a gauge for the crowd’s view and accordingly how the office’s odds were likely to be priced. He would then have cited a statistical service like Ken Pomeroy's, which ranks teams based on purely quantitative factors such as shooting, turnover, and rebounding efficiency. Next, Buffett would have hunted for wide gaps between the crowd’s appraisal of the odds (the National Bracket) and his calculation of the intrinsic odds derived from the stats. He’d have looked for situations like Syracuse, which began the tournament with the crowd pricing its odds of winning at just 1 in 300. If Buffet, using certain quantitative statistics, had calculated the odds as being far better than 1 in 300, then he’d consider Syracuse’s odds potentially mis-priced. If Buffett were a pure quant, he’d have merely built his bracket with a purely numeric approach. This would have been the “smart indexing” approach. But Buffett is much more than a quant. He would thus have taken it a step further and performed some old fashioned investigative research, or “scuttlebutt” as he calls it. He’d have watched interviews with players and coaches, attended some live practices, and learned about recent injuries. He’d have gone above and beyond to gain insight on the teams he was investigating (legally and ethically, of course). Taking all this into account, Buffett would have built his bracket tilting toward teams that had the widest gaps between the crowd’s opinion and his own appraisal derived from his quantitative analysis and scuttlebutt. Buffett will not win every year with this strategy, but over time, he’ll win more than his officemates – perhaps a lot more. At least that’s how it’s worked out for him applying the same approach to investing. Now here’s the ironic part. The office receptionist, who knows nothing about basketball, will surely one day ask her skilled colleague Buffett how she should fill out her own bracket. If you were Buffett, what would you tell her? Probably the same thing that he’s suggested to average investors for years: just do what Bogle does. At least his indexing approach guarantees she won’t end up falling prey to the advice of the office blowhard or some expensive online tip service, which could doom her to finish at the bottom of the office rankings. The downside, at least from the perspective of the true sports fan, is that applying this “finish in the middle” automatic system will never ignite this receptionist’s interest or passion in the sport of basketball. At least the “smart indexing” method helps her understand that sometimes the game doesn’t turn out like the crowd expects. Now that’s exciting, and it offers hope of engaging her interest to learn more – and maybe even take control of her own bracket. In time, a National Bracket composed of more independent, educated bets and fewer “follow the crowd” bets will result in more efficiently calculated odds, and a far more engaged and informed crowd of fans. That’s good for the fans and good for the sport. It’s too bad that no one in the office has the time or inclination to teach the novice receptionist how to follow Buffett’s approach to completing her bracket – even if just the first step (“smart index”). Fielder’s novel ambition is to do just that in the world of investing, helping real people beat the odds by engaging them more deeply with their money and showing them how to build a winning bracket they understand and excites them. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week "The biggest risk is not taking any risk. In a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks." - Mark Zuckerberg, Founder of Facebook I saw her across the room. Wow. She was beautiful, but there was something else about her – something special in her smile. I had to meet her. As I made my way across the room, the adrenaline surged. All of a sudden, fear and doubt took over. Chances are she would reject me. Hopefully, she'll be nice about it. Surely, someone like this has a boyfriend. (That, or she must be crazy.) Thankfully, a rational courage came back to me. The worst thing that could happen is that this pretty stranger snubs me. That was a risk I could handle. Who knows? Maybe, she really is special ... my perfect match in the universe. Besides, let’s face it: I’m kinda of a catch. (Self-delusion in times of doubt does have its advantages.) With my courage regained, I walked over and met my future wife. Nine years later, I still think back on that night and its powerful lesson on risk. I came so close to not meeting the most important person in my life – all due to a momentary irrational fear (or flawed risk/reward appraisal). What made the risk so worth taking was not the hindsight that it paid off so well. After all, she could have rejected me. Rather it was the high upside/downside potential that was so attractive. Now here’s the weird thing: Many, if not most, investment professionals and academics seem to misunderstand this basic concept. They’re obviously not stupid people. Rather, they’re intellectual prisoners to a dogma that fundamentally distorts the nature of risk and reward. The foundation of modern portfolio theory is the presumption of a “risk premium”. Translated into English, this means that assets with higher risk earn higher returns over time. Stocks are inherently more risky than cash, so investors should be compensated with higher returns for accepting that risk. That’s their reasoning, at least. Fielder rejects this framework at its foundation. Specifically, we reject the notion that taking higher risks endows one with the right to higher rewards. Yes, aiming for higher rewards requires one to accept higher risk. But it does not necessarily work the other way around. If I get drunk, put on a blindfold, and run back and forth across Fifth Avenue at rush hour, I am not therefore entitled to good things happening to me. Just the opposite. Hazardous risk-taking (small upside, big downside) is more likely to bring bad things than good. And so it is with investing. One of the main problems we see with traditional asset allocation is that it does not consider valuation. Rather, it presumes that past returns and volatility are indicative of what we should expect in the future. This approach leads to over-allocating to risky assets after long periods of good times and under-allocating to risky assets after long-periods of bad times. The reward/risk of internet stocks during 1999 was akin to running drunk and blindfolded across Fifth Avenue. Owning the S&P 500 in the early 1980s was more like introducing yourself to that attractive stranger. Which kind of risk is your money taking today? Now is a good time to do three things: First, try to understand how much risk is in your portfolio. This can be quantified a number of ways. Second, carefully reflect whether your personal temperament is comfortable with that risk level. Finally, explore if the mix of investments in your portfolio should be realigned to improve the odds of achieving your return needs, while remaining within your personal tolerance for risk. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week “Before I cofounded Whole Foods Market, I attended two universities … I only took classes I was interested in … I never took a single business class … (T)he progressive political philosophy I believed in had taught me that both business and capitalism were fundamentally based on greed, selfishness, and exploitation … of consumers, workers, society, and the environment for the goal of maximizing profits… In contrast to evil corporations, I believed that nonprofit organizations and government were “good,” because they altruistically worked for the public interest, not for profit…. Becoming an entrepreneur and starting a business completely changed my life. Almost everything I had believed about business was proven to be wrong. The most important thing I learned in my first year … was that business isn’t based on exploitation or coercion at all. Instead, I discovered that business is based on cooperation and voluntary exchange. People trade voluntarily for mutual gain. No one is forced to trade with a business. Customers have competitive alternatives in the marketplace, team members have competitive alternatives for their labor, investors have numerous alternatives to invest their capital, and suppliers have plenty of alternative customers for their products and services. Investors, labor, management, suppliers – they all need to cooperate to create value for customers. If they do, … business is not a zero-sum game with a winner and loser. It is a win, win, win, win game ...” - John Mackey, founder and CEO of Whole Foods Conscious Capitalism (2013) Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week “I don’t subscribe much to any of these fancy investing theories… I believe the folks who’ve done the best with Wal-Mart stock are those who have studied the company, who have understood our strengths and our management approach, and who, like me, have just decided to invest with us for the long run… As long as we’re managing our company well, as long as we take care of our people and our customers, keep our eye on those fundamentals, we are going to be successful. Of course, it takes an observing, discerning person to judge those fundamentals for himself. If I were a stockholder of Wal-Mart, or considering becoming one, I’d go into ten Wal-Mart stores and ask the folks working there, 'How do you feel? How’s the company treating you?' Their answers would tell me much of what I need to know.” - Sam Walton, founder of Wal-Mart Sam Walton, Made in America (1992) Three Fools Three fools I’ve met over the years. Each one has appeared, at one time or another, in my bathroom mirror. Of course, I’ve spotted these fools other places too -- often on TV, sometimes in the faces of people I love and respect. With age, I’ve learned to recognize them even in disguise. That’s important because their faces and names are constantly changing. Some fools are harmless, or even fun. These are dangerous. They destroy wealth and wreck lives. Here are their names … The Extrapolator – This guy believes the past will be the future. Hence, he “knows” that stocks go up 10% per year over the long-term (from any price level). Market declines don’t bother him. He puts in his headphones and zones out, believing he has a God-given right to earn superior returns since he is accepting more risk. This guy is fun to talk to at parties because he’s confident, always in a great mood, and never worried about anything. The Denier – This guy is no fun at parties - at all. This fool considers himself nobody’s fool. Forget stocks, he reasons. They’re for suckers. The market is too high; the economy is about to nose-dive; the game is rigged. He thus owns no stocks. He’s permanently on the sidelines. This fool masquerades as cautious, yet over time is as reckless and wealth destroying as the others, if not more so. The Alchemist – The most fun to hang with at parties is by far the Alchemist. He’s just so damn interesting! He’s got it all figured out. Like his close cousin, the Extrapolator, he too is a student of history. Unlike his cousin, however, this fool uses history to time getting in and out of investments. There’s lots of complexity, often leading to lots of activity – lots of buying and selling. This fool does not age well. Nor is he good for his friends’ health. As much fun as he may be, this fool’s friendship comes at a price: higher transaction/friction costs, higher taxes, and higher blood pressure. It pays to learn to spot these fools - especially when they appear in our own mirrors. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week "Of course, my wife hates that I read for more than three hours almost every day, but it gives me a level of comfort and confidence in my business. AtMicroSolutions it gave me a huge advantage. A guy with minimal computer background could compete with far more experienced guys just because he puts in the same time to learn all he could." - Mark Cuban, founder of MicroSolutions (and owner of the Dallas Mavericks) How to Win at the Sport of Business The Biggest Myth Happy 2016! Well, maybe not so happy. Stocks had a lousy 2015, and they’re starting off this year even worse. When things get bumpy like this, it’s important to know what you own and why you own it. Are you too heavy in stocks? Are you too heavy in the wrong kind of stocks? Next week we’ll host a webinar to help you answer these critical questions. It's a big myth that stocks go up 8-10% per year.The reality is that stocks are far more volatile than that. Over the past 25 years, stocks have rarely generated returns between 8-10% in any particular 12-month period. They’ve been just as likely to fall 18% or leap 33% over the course of a year. If you own stocks, forget 8-10% per year. Stocks are volatile – they go up a lot some years; they go down a lot some years. What matters is how they perform over the very long-term. Even the bumpy 10% average is a myth. A celebrity financial adviser last year predicted that the Dow will hit 75,000 within 15 years (up from today’s 16,900 level). The basis of his reasoning is that the market has gone up about 10% per year since 1926, so assuming that same return going forward, the Dow should hit 75k by 2030. This is dangerously flawed reasoning. For one thing, it completely ignores valuation. Stocks were much less expensive (as measured by their price relative to earnings, or P/E) in 1926 than they are today. Price matters. If you pay too much for anything, it hurts your chances of selling it at a profit in the future. From today’s high valuation levels, stocks as a whole ("the market") have lower odds of producing a positive real return in the 5-10 years ahead. Selectivity and prudence will matter far more going forward than in the past. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Worth a smile and a toast on Christmas ... On behalf of Fielder's team, may I propose this holiday toast to all our Friends in the Field: May 2016 bring us ... Less online distraction, More human interaction, Fewer needless cravings, and heaven please ... Some interest on our savings! Happy Holidays to all! Cheers, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.