Investment Style

We believe the key to investment success in today’s marketplace is taking calculated risks that combine a macro view of world financial dynamics with technical risk management tools.

Our Macroeconomic Investment Philosophy
Our philosophy focuses on taking advantage of a unique set of circumstances that finds the United States the largest debtor nation in world history. We believe this presents the investor an unusual opportunity to capitalize on the U.S. government’s predicament.

Bonds and Inflation
A bondholders worst enemy is inflation. In the inflationary 1970’s, many holders of Treasury Bonds found their principal eroding on a daily basis. This bout with inflation essentially robbed fixed income investors of their money. This was especially damaging to those who thought that a U.S. Treasury security was one of the safest investments in the world. Since that time, the Federal Reserve’s chief focus has been to assure investors that inflation will not be a problem again. That vigilance is now changing as the Fed has become a deflation fighter. Most economists view deflation (such as happened in Japan in the 90’s) to be much worse than inflation. Given a choice between the two, Alan Greenspan and the Fed Governors have voted for inflation. For the first time in history, a central bank has announced that they want to inflate. In fact, the rhetoric from Fed Governor Bernacke is almost shocking given his high level position. In essence, he has made it clear that we will inflate “as much as we have to” to insure we don’t emulate Japan. Ironically, the prices of U.S. Treasury Securities are much higher (and yields lower) thanks to ongoing purchases by the Central Banks’ of Japan (and China.) These two governments have made it possible for the United States to run up more debt than any other nation in history. The question is, how long will they continue to subsidize American debtors?

Click here to find out how to capitalize on bonds in an inflationary environment.