At Alhambra, as Joe Calhoun wrote last month, we embrace the merits of both value and momentum in investing. The decision to buy value or momentum, though, should not be made in isolation. At Alhambra, our tactical strategies embrace long term investment solutions which incorporate value and momentum decisions based, first, upon our analysis of fundamentals and the monetary and fiscal environment. A rising tide lifts all fundamentally sound ships and, at times, some ships more than others. From an overall portfolio perspective, a combination of fundamentals and the scrutiny of the monetary and fiscal environment combined with sound long term investments and an awareness of market psychology is our prescription for investing success.
Here are some items to note about the current domestic investing environment.
Fundamentals and valuation:
Equities are historically cheap but earnings growth has slowed.
The implications of more financial regulation and the media’s portrayal of banks would indicate a problem. But, historically, their corporate balance sheets are not so bad.
Monetary Environment:
Money is cheap and the value of the currency is not important to the leaders. Liquidity exists.
Fiscal Environment:
Regulation is trumping free market economics. Government transfers are unhealthy, but have abated at elevated levels. This is a headwind on liquidity.
Momentum:
The current trend is strong.
Sentiment:
Contrarian Indicators are flashing red.
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For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Douglas R. Terry, CFA is reachable at dterry@4kb.d43.myftpupload.com
