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summaries

Reflecting on significant themes that emerged during2006, one of the good trends that deserves moreattention is the growing awareness and commitment ofphilanthropic work around the world. Whether it isWarren Buffett pledging $31 billion to the Bill andMelinda Gates Foundation or a friend deciding toprovide a scholarship to underprivileged students inAfrica, something good and personal is drivingindividuals to give back to our global community.

There have always been good people giving back tothose less fortunate. Thank goodness. Today, however,it feels like something bigger and more prominent ishappening that is inspiring more of us to participate ingood causes. And, the causes are becoming morepersonal.

A great article on the subject of personal involvementrecently appeared in the November 27, 2006 publicationof Barron’s Financial Newsweekly, "Personal Passions".The author, Suzanne McGee, provides numerousexamples of individuals giving to causes that are morenarrow in scope but have personal meaning. The socalled "me" factor is being felt in all levels of giving.Active donors are favoring well-defined causes that stirthem emotionally. Some are supporting fields theydreamed of pursuing earlier in life, while others arehoping to eradicate diseases that claimed the lives of aloved one.

McGee described a couple in their 70s that decided thenursing profession was an area that needed attention.They started a foundation that provides grants toprojects that are helping nursing schools and hospitalsto work closer together.

Another great story from the article tells the tale of aninvestment-marketing executive of 30 years who indicatedthe approach of her 60th birthday prompted her tobegin "giving back" to society. She wanted to fostergreat communities like the one she grew up in. Shechose Ghana, due in part to an honors thesis she hadwritten decades earlier at Scripps College on the subjectof pan-Africanism. She decided to adopt a village andset up a micro-finance program that extended businessloans to the local women.

To make a long story short, after selling a car for$18,000, she set off for Ghana in 2003. She foundher village, Pokuase, and began working with the localwomen to become financially self-sufficient.Furthermore, this executive’s initiative rubbed off on herfriend and hedge fund manager, who was a self-proclaimed anti-philanthropist. The hedge fund managerwas persuaded that if her friend could drop everythingfor this worthy cause, she would do more than justwrite a check. Last summer, her friend found herselfboarding a plane for Ghana.

Another noteworthy theme of personal philanthropy isthese philanthropists are willing to invest and promotenew models and controversial causes. It is often citedthat big breakthroughs come out of a committed donorswillingness to embrace a potentially controversial idea ormission.

While it is interesting to read and envision ourselves inthe village of Pokuase, helping local women find a wayout of their dire situations, it is also very difficult andtricky to find the right organizations and people to givethrough.

Look Before You Givethe official newsletter of sigma investment counselors December 2006

summaries

26261 Evergreen • Suite 455 • Southfield, MI 48076 • tel (248) 223-0122 • fax (248) 223-0144 • www.sigmainvestments.com

While the amount itself is mind-boggling, one of theprimary reasons Warren Buffet chose the GatesFoundation for his $31 billion pledge was that thefoundation was already scaled-up and that it wouldn’thave to go though the grind of getting to a megasizelike the Buffett Foundation would. Commentingfurther on the Gates Foundation, Buffett states "… lifehas dealt a terrible hand to literally billions of peoplearound the world, and Bill and Melinda are bent onreducing that inequity to the extent they possibly can.You don’t get an opportunity like that ordinarily. I’mgetting two people enormously successful at something,where I’ve had a chance to see what they have done,where I know they will keep doing it - where they havedone it with their own money, so they’re not living insome fantasy world – and where in general I agree withtheir reasoning."

One hopes that the Gates foundation is off doing greatthings and spending their dollars wisely. Although, as itgrows in size and importance to global causes, it is hardnot seeing the foundation becoming more bureaucratic.Historically speaking, becoming bureaucratic is one ofthe huge problems that big organizations have. Theydeal more with governments and policies and less withlocal problems and needs.

A recent book by William Easterly titled "The WhiteMan’s Burden - Why the West’s Efforts to Aid the RestHave Done so Much Ill and So Little Good." Easterlywrites about the twin tragedies of global poverty. Thefirst, so many are seemingly fated to live horriblystunted, miserable lives and die such early deaths. Thesecond, after fifty years and more than $2.3 trillion inaid from the West addressing the first tragedy, there isshockingly little to show for it. We will never solvethe first tragedy, Easterly argues, unless we figure outthe second.

The book provides numerous examples of why the Westhas been so ineffective at solving the problems of thepoor, while having the best intentions. What is most

interesting about Easterly is that he was an insider. Hewas a senior research economist at the World Bank formore than sixteen years. His irreverent attacks towardthe bad policies and continuous behavior at aid-bloatedbureaucracies like the IMF and the World Bank arethought provoking and sad at the same time.

What is most shocking is that we, the West, the"Planners", are not learning from our mistakes of thepast. We continue to pump billions in aid to corruptgovernments and "Big New Idea" policies that we knoware not working. A lack of accountability and a dearthof local feedback apparently are not being addressed atthese organizations.

Easterly strongly promotes more support and financialresources to the so-called "Searchers", agents for changein an alternative approach. Planners announce goodintentions but don’t motivate anyone to carry them out.Searchers find things that work and get some reward.Planners raise expectations but take no responsibility formeeting them; Searchers accept responsibility for theiractions. Planners decide what to supply; Searchers findout what is in demand. Planners apply globalblueprints; Searchers adapt to local conditions. Plannersat the top lack knowledge of the bottom; Searchers findout what the reality is at the bottom. Planners neverhear whether the plan got what it needed; Searchersfind out if the customer (the poor) is satisfied.

A planner thinks he already knows the answers; hethinks of poverty as a technical engineering problemthat his answers will solve. A Searcher admits hedoesn’t know the answers in advance; he believes thatpoverty is a complicated tangle of political, social,historical, institutional and technological factors. ASearcher hopes to find answers to individual problemsonly by trial and error experimentation. A Plannerbelieves outsiders know enough to impose solutions. ASearcher believes only insiders have enough knowledgeto find solutions, and that most solutions must behomegrown.

26261 Evergreen • Suite 455 • Southfield, MI 48076 • tel (248) 223-0122 • fax (248) 223-0144 • www.sigmainvestments.com

If your curiosity is aroused regarding these paragraphsabout "The White Man’s Burden" the rigor of Easterly’swork will certainly cause you to think about the West’sforeign aid policies.

On the other hand, you will be glad to know thatEasterly drops in many small, locally based successstories of people and yes, organizations, that are makinga difference and getting real results in helping those inneed.

In summary, the desire to help and support those mostin need seems indeed to be growing. However, it isimportant that we all do our homework regarding thecharities and causes that we identify with. Once wehave completed our homework, the probability ofactually making a difference in peoples’ lives will surelyincrease.

We wish you Peace and Joy this Holiday Season and aNew Year of Health, Happiness and Prosperity.

Roger N. SteedChief Investment Officer

The Economic andMarket EnvironmentIInn SSuumm:: Global equity returns in 2006 appear poisedto post their best performance in the last three years.Bonds should show solid, if unspectacular gains.Geopolitical risks appear to be stabilizing somewhat, savefor the environment in Iraq. On balance, CentralBankers around the globe have been raising interestrates, but it would appear these rates are peaking.Economic growth has been stable, and inflationarypressures seem well under control. The US budgetdeficit fell I 2006. Modifications to both revenues andspending can be expected when the newly electedcongress convenes in January 2007.

GGeeoo--ppoolliittiiccaall:: North Korea continues to share centerstage with Iraq as unfolding events in those twocountries occupy much of the developed world’sattention. At this writing, North Korea was scheduledto resume negotiations over their troublesome nuclearoperations with representatives from other interestedcountries including the US, China, Japan, Russia andSouth Korea. Given the unpredictable nature of theNorth Korean position, it is difficult to paint anoutcome, but the North Koreans appear to have fewoptions as restrictions placed upon them have had theirdesired economic effect. Iraq remains a cauldron. Sixweeks after US elections and the release of a report onpolicy options by the Baker/Hamilton Iraq Study Group,no consensus has emerged as to how the US shouldproceed in that fragile country. In Iran, a perennialchallenge to G7 foreign policy, a headline in theDecember 12, 2006 issue of the Financial Times ofLondon "Scent of triumph may elude Ahmad-Nejad"indicates that country’s volatile president may be seeinghis popularity eroding, a development that would bewelcomed in most of the world.

EEccoonnoommiicc:: Economic nirvana for central bankers isnon-inflationary growth. The US Labor Departmentreported unchanged prices in November, a welcomeddevelopment. Economic growth appears poised tocontinue as the US government announced industrialproduction moved higher in November after twoconsecutive months of declines. Global growth alsoappears relatively robust.

MMoonneettaarryy:: The US Federal Reserve Board met in midDecember and voted to keep interest rates unchanged.The European Central Bank did raise rates modestly.Other central bankers in the industrialized countriesprimarily have been raising rates, although the paceappears set to moderate. Risks between recession andinflation appear balanced at present.

FFiissccaall PPoolliiccyy:: The US Budget deficit continued tocontract and in November stood at $75.6 billon versus

just over $83 billion one year ago. As the newDemocratically-controlled Congress convenes in January,a tone should be established that will mark thedirection of revenues and spending for at least the nexttwo years, coinciding with the remainder of the Bushadministration term of office.

EEqquuiittyy mmaarrkkeettss:: Global equity markets continued topost strong results into the latter part of December, asprivate equity investors and underperforming hedgefunds moved liquidity into common stock investments.

Returns appear to be poised to post the best annualresults in the last three years.

FFiixxeedd iinnccoommee mmaarrkkeettss:: Interest rates continue rangebound, as they have for most of 2006. This reflectsthe myriad geopolitical and economic cross currents overthe past several months, punctuated by volatile energyprices.

Robert M. Bilkie, Jr., CFADecember 17, 2006

26261 Evergreen • Suite 455 • Southfield, MI 48076 • tel (248) 223-0122 • fax (248) 223-0144 • www.sigmainvestments.com

Please remember to contact Sigma Investment Counselors if there are any changes in your financial situation or investment objectives.

The views in this publication are as of December 2006 and are for educational purposes only. The information presentedhas been gathered from sources believed to be reliable. Statements concerning financial market outlook are based oncurrent market conditions, which will fluctuate. Keep in mind that each sector of the market entails risk. Each investorshould evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

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The Securities and Exchange Commission requires, under Rule 204-3 of the Investment Advisers Act of 1940, thatinvestment advisors offer, annually, a copy of Form ADV, Part II, which is a written disclosure document containinginformation concerning the background and business practices of the advisor.

Sigma Investment Counselors is please to provide a copy and hereby offers to deliver the brochure to any clientupon receipt of your written request.