Michigamme Highlands: The Place I Never Really Left

My first introduction to the Michigamme Highlands was walking with my dad and sister through the remains of an old mine to a deep tunnel bored into the earth. I was very young and a little afraid of falling into a hole—or a bear coming out of the cave. But this is the Michigamme Highlands: rugged, remote and undeveloped.

The Michigamme Highlands is a vast wilderness near the center of the Upper Peninsula of Michigan (U.P.), a land half the size of Rhode Island that time mostly forgot.

I grew up near here, a third-generation Nordic American, part of a wave of immigrants who came for mining jobs. The house my dad built is still in our family. We also had a cabin in Michigamme, a small mining town with a ghostly feel—a place that refuses to die.

Since I was very young, I have roamed vast portions of the Michigamme Highlands, primarily fishing and camping. I spent countless days riding its mostly seasonal gravel and two-rut roads in a beat-up pickup with my uncle, searching for elusive brook trout in small, remote streams.

I remember walking along railroad tracks down to an abandoned bridge, perfect for fishing. I’ve followed roads along the remains of an old railroad blasted through its roughest terrain—the Huron Mountains—built in the 19th century but never moved a pound of freight before it was scrapped.

After I got married, I introduced these backwoods to my wife. As we slowly worked her new Jeep Cherokee along a two-rut road, I realized we were driving along a leaky beaver dam, water rushing across the road ahead of us.

The Land Itself

The Michigamme Highlands is home to hundreds of lakes, rivers and streams, and many animals, including wolves, moose and an occasional mountain lion.

It has large tracts of old-growth and mature northern hardwood/hemlock and pine-oak forests, one of the Upper Midwest’s most undisturbed forest remnants. It includes the highest elevations in Michigan, including Mount Arvon and Mount Curwood. 

The weather matches the terrain, with higher elevations receiving up to 200 inches of snow a year, snow that covers some parts of this area continuously for nearly seven months a year.

Lake Michigamme, where the town of Michigamme sits, remains a grand lake, one of the largest in the U.P. It is the natural center of the Michigamme Highlands.

The town still has an occasional train come through, although the roundhouse I remember is long gone. Indian Trails still provides a daily connection to the rest of the U.S. “Mt. Shasta,” the local eatery used in the filming of Anatomy of a Murder, is still open, and looks much like I remember it from when I was young.

The name Michigamme Highlands is a new term from the past couple of decades. It is used by the government and larger organizations to recognize the ecological value of this area. It’s not a single entity but rather a patchwork of national, state and private land that is largely available for anyone to use for outdoor activities.

Places to Explore

The most notable set-aside in the Michigamme Highlands is McCormick Wilderness, a huge square tract, with over a dozen lakes and the headwaters of four river systems. It was once a private lodge for the McCormick Family of Chicago.

An aunt and uncle of mine lived there for several years, working to maintain this elaborate lodge. It is now a wilderness area owned by the U.S. National Forest.

Another protected area is Craig Lake State Park, smaller but just as remote. The Nature Conservancy has purchased thousands of acres of land abutting this park, setting it aside forever as wilderness.

There is also a more hospitable state park on Lake Michigamme, plus some Michigan State Forest campgrounds, all great places to set up camp. One of the more dramatic landscapes here is the Sturgeon River Gorge Wilderness, a harrowing mountain canyon where the river cuts through cliffs, waterfalls, and boulder fields in a deep forest.

The North Country National Scenic Trail stretches 4,800 miles from New York State to North Dakota. It follows the full length of the U.P., including through the heart of the Michigamme Highlands. It’s easily accessible at multiple places, including McCormick Wilderness and Craig Lake State Park.

A notable section to check out is Trap Hills, just a bit west. It is another trail through steep ridges, with challenging climbs and sweeping views. It’s widely considered one of the toughest yet most rewarding hikes in the Midwest—and one of the best sections of the North Country Trail in the U.P.

More Good News

There's also some encouraging recent news. The Michigan Department of Natural Resources has purchased a permanent wildlife easement of 73,000 acres within the Michigamme Highlands. This keeps a large forest privately owned but permanently protected from development. It guarantees public access and sustainable logging while preventing subdivision or fragmentation of the land.

If you're in moderately good shape and enjoy outdoor soft adventure—whether day hikes, birding, fishing, hunting, backpacking, car camping or an Airbnb—you may want to consider an off-grid trip into the Michigamme Highlands.

Here’s some additional information to help with a visit:

• Best seasons to visit: July - September, although May, June and October can all be very nice.
• Contact Ottawa National Forest for information on McCormick Wilderness and Sturgeon River Gorge Wilderness at www.fs.usda.gov/r09/ottawa.
• Contact the State of Michigan for information on Michigan State Parks and State Campgrounds: www.michigan.gov/dnr/
  
  
• Nearby towns with services: Ishpeming and Marquette. 
• Maps/trailheads: Michigamme Highlands Map, Trap Hills/North Country Trail

I’ve spent decades returning to the Michigamme Highlands, and each time I’m reminded of a few things. First, not all investments are for physical security. Some are for the soul—and nature may be the best investment of all.

Second, in a world where most assets are constantly traded, upgraded or optimized, places like this are a reminder that preservation can be its own form of return.

And in the Michigamme Highlands, that return still looks a lot like it did when I first walked into that old mine.

My Eight-Year Experience With Micro-Caps

On December 8, 2017, Jason Zweig wrote a fascinating column in The Wall Street Journal titled "Index Funds Rule the World, But Should They Rule You?" The article questioned the dominance of index funds and suggested there might be opportunities in the market’s smallest companies.

My son, who shares little of my investing interest, told me about this article. I was intrigued. Here’s my story.

Mr. Zweig pointed out that there are "orphan stocks"—mostly very small micro-cap stocks under $100 million in market capitalization that generally aren't owned by index funds. Therefore, these mostly abandoned stocks can sell below their fundamental value.

But if for any number of reasons they grow, index funds may be forced to buy them. In theory, this structural pressure should raise the price of these stocks, possibly more than their fundamentals might justify.

I decided to give it a try. I limited myself to two stocks and not a lot of money (about 1% of our life savings). I promised myself that no matter the pain, I would not sell them, arguing that regardless of the results, I would learn something.

I still own one of those stocks. It is up three and a half times from what I paid for it, and last year it was added to the Russell 2000 index.

The second stock I bought dropped dramatically, and then rebounded when a foreign company purchased the entire company. I was now two for two. Feeling a bit more confident, I slowly started buying other orphaned micro-cap stocks, fifteen in total, nine of which I still own.

There’s some additional background that may help with my exercise. Modern Portfolio Theory (MPT), one of the foundational theories of modern investing, was developed decades ago. The details are extremely complicated, but essentially it says two things:

First, over time, higher risk investments can provide a higher return. That is, investors are generally paid for the risks they take. For example, U.S. Treasury bonds pay little because they are so safe. Other sectors such as micro-cap stocks and emerging markets tend to provide higher returns to compensate for their risk.

Second—and this is critical—if you own multiple low-correlation assets, your overall risk is reduced, but your expected returns are not. That is, you get at least some of the value that comes from owning higher risk assets but without all of their downside. This is the argument for asset allocation, the strategy of dividing your investments among different asset classes to balance risk and return.

This is what I've commonly done with my investments. No matter how bad things can get, I normally have another investment, such as I-Bonds or REITs, shoring up at least some of my portfolio.

Micro-cap stocks are inherently high-risk investments. But MPT suggests that over time, having some micro-cap stocks in a broad portfolio can reward their investors with a higher return. Diversification with other mostly uncorrelated investments reduces (but does not eliminate) their risk. That is, an investment like this can raise your total portfolio return without adding comparable risk.

I quickly learned some issues with orphaned stocks. They may not regularly trade. It may be difficult to get timely financials. And they can lose a lot of money very quickly.

I soon limited myself to stocks with steady or growing revenue, somewhat stable prices and that trade on either the New York Stock Exchange or the Nasdaq. Let’s say I’m trying to buy very small companies that seem to be doing well but are not overpriced. They have real people working for them providing real goods and services to paying customers.

As usual, I avoid assets that I don't understand, such as utilities or alternative health products, and I avoid hot markets such as AI and gold. I'm drawn to sectors that have some obvious purpose, such as healthcare, industrials and energy.

But probably most importantly, I score all my stocks based on some standard valuation and financial metrics, and I trust this simple scoring more than my instincts.

I've learned a lot with this exercise, but most importantly, I found that MPT does seem to work. When mixed with other, more traditional investments, they can increase your returns without much increase in volatility.

This is another lesson from stocks. While they can’t go lower than zero, they can rise any amount short of infinity. Yes, that may be simple thinking, but in my sample case, about a quarter of my stocks have lost some money. But six of them have at least tripled, far exceeding my losses.

Please note that, statistically, the median micro-cap stock often underperforms the market and that it is not unusual for them to never grow, and to quietly disappear.

There are endless claims that index funds will almost always outperform individual stock portfolios, on the argument that most gains come from very few stocks. In this theory, winning is a matter of luck.

But this has not been my experience. For years, I’ve repeatedly checked this claim on all my stocks, and the story is the same: Over larger time periods, although a majority of the gains are from a minority of the stocks, this minority isn’t small but instead is rather significant. Gains aren’t contained to a couple of lucky buys, but across a broader segment.

I also have frustrations with the fundamental mechanism of indexes, where they own more of overpriced stocks and less of undervalued stocks. I understand that this is due to their structure, but I don’t have to like it.

For example, today the S&P 500 index has about 30% of its value in less than a dozen huge companies, which many valuation models currently consider to be expensive. Indexes love ‘buying high,’ but not me.

I have slowly purchased these orphan stocks over many years, have occasionally made sales and some repurchases, and have sold several outright. I have limited them to a small percentage of our life savings, always prepared to eat a heavy loss.

But according to Quicken, the average annual return of my orphan micro-caps over these eight years, including unrealized gains, has been 39%, beating the average annual return of the U.S. broad market (Russell 3000) over the same period by 26 percentage points. Although there were some better years, my orphan stocks only trailed the U.S. market in one year (2022) and I’ve only realized nominal losses on a couple of stocks.

There are many easy challenges to this record—luck, small sample size, odd concentrations, small company premium, unacceptable volatility, a micro-cap boom. It is entirely possible that this has been a favorable eight-year window for micro-caps, and that another time would produce vastly different results.

I accept all of these as reasonable or even probable. But I obsessively track all my individual stocks and have casually noticed a pattern that individual orphans are highly volatile on a daily basis but collectively are not as scary as advertised.

All but one of my orphan stocks has been U.S.-based, and all were in just five sectors. Most of my investments were in industrials, healthcare and IT (electronics), and almost all the gains were in these areas.

A look under the hood, however, can be scary. It's not uncommon for a stock to drop in value by 50%. Rising or falling by double digits is also common, sometimes in a very short time. This is stomach-churning turmoil that has to be ignored.

But over time and across multiple investments, my returns suggest that they are tolerable in small amounts as part of a diversified portfolio—which is what MPT claims. Yes, arcane language and formulas would dispute much of this—remember that everything today is about indexes—but this is what I’ve thought forever: Indexes aren’t the only game and they have flaws.

My experience in no way suggests that picking stocks is easy or successful. And you can look no further than professionals to show how poorly stock picking normally goes. I recommend it to no one, if only for the angst.

I have learned some investing lessons. First, never own anything you don't understand, whether Apple or bonds or bitcoin. Second, challenge the basics of any company. Are the goods or services sound? Would I work for such a company? Most of the orphan stocks I have purchased have had very little or no long-term debt, solid revenue, and real customers—that is, in a way, my purchases are somewhat conservative, albeit small.

Decide on three or four metrics that you trust as fundamentals that represent a typical company, and then monitor your stocks by them. If a stock seems to be priced far too high or its finances are questionable, consider selling at least some of it regardless of its recent record. 

If a stock drops a lot, before considering a sale, first consider whether you would otherwise buy it. If you would, then don't sell it, but do consider another purchase.

Journal your buys and sells. Write out why you are making your transaction, and then look back for patterns. If nothing else, it might slow you down from a bad move.

Finally, there's another life lesson I've lived by, and that is to not overcomplicate things. In investing, don't agonize over daily price swings. Never time the market—it's a losing game. Activity is not your friend—when in doubt, do nothing.

If I know nothing else about an individual investor, my investing advice is to buy and hold low-cost index funds across a couple of areas, such as U.S. stocks, international equities and bonds. Then rebalance them every year or two. Over time, you won't just do well—you'll outperform most of your friends and nearly all of the overpriced managed equity funds.

But, as Mr. Zweig notes in his article, even ardent proponents of index funds will purchase some individual stocks just “because it’s fun.” To anyone who wants to do this, it isn’t rocket science—it does not require some special genius. And with some work, you too can learn something—and maybe make some money.

My Back Pages

I have a long history with Bob Dylan. When I got my first guitar—mail-ordered from Sears Roebuck for $18—his songs were some of my favorites to play, most notably “Masters of War.”

    Like Judas of old, you lie and deceive…
    You sit back and watch as the death count gets higher…
    You ain't worth the blood that runs in your veins…

And there were so many more: Blowin' in the Wind, The Times They Are A-Changin', Mr. Tambourine Man.

I never forgot Bob Dylan. Then recently, one of my Pandora radio stations played “My Back Pages” from his 30th Anniversary Concert Celebration—probably the best recording of this song. 

I was nearly in tears listening to it, written in the early 60s, played by a grand mix of musicians from this era who came together to celebrate Bob Dylan's first 30 years as a recording artist.

A friend of mine once told me that you have to have lived the 60s to understand it. It's the period I grew up in. I remember the Vietnam War, including the hundreds of Americans who died every week, sometimes for months at a time.

I remember when Detroit was on fire in 1967. The murders of Robert Kennedy and Martin Luther King.

I remember Nixon and his lying. In the end, he was a crook.

He resigned the same week I boarded a Greyhound bus with my guitar and bag, heading off to New York City to save the world. My elderly friend I made while away asked me to always stay a romantic. I returned on the same bus a year later, older than I was then but still a romantic.

I remember my fateful day in seminary, on my way to a life as a pastor, still trying to save the world. I walked back to my apartment, and within days I quit, returned to college to finish up a degree in mathematics and got myself a job in IT. 

What I had always planned had become more than I could do. 

I never looked back but I also never forgot this side of me. I married the girl of my dreams, had three boys and moved, ironically, to the small northern city Bob Dylan was born in. We bought a house with everything but a white-picket fence. And I got a cabin and a four-wheel drive truck, too.

Oh, I’ve liked my life—the hopes and dreams, for myself and the world. But each step I grew younger. The obvious became less so.

Now retired, I'm still playing my guitar. I spend a lot of time volunteering in the same human services I started as a teenager, still believing I can change something for the better. That maybe showing up, one person at a time, I can pass along something I’ve learned to anyone who cares.

I look at my kids and their generation, and recognize the same urgency I once felt, even if it shows up differently. They see problems we missed and push where we dropped off. And sometimes they simplify things the way we once did—because that’s often how change begins.

Maybe every generation needs its own version of certainty before it can learn humility.

I parted ways with Bob Dylan somewhere in my twenties. His most popular songs became a tiring reminder of bygone days. But a few years ago, I bought Blood on the Tracks and tried Dylan again for the first time, and I saw another side of him.

My Back Pages is a great example of the Bob Dylan I’ve come to know. He wrote it just a few years after he gained his reputation as a leader of the 60s protest movement. But apparently he came to see the black-and-white, good-vs-evil confidence this movement lived by as a rather simplistic view of big problems.

In this controversial song, he was saying that there may be other takes on complex issues like war and equality. That he was so much older then, and younger than that now.

My back pages don’t make me cynical; they make me patient. The work still matters. It just takes longer than a song, longer than a decade—sometimes more than a lifetime.