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MODEL PORTFOLIO
 

QUALITATIVE OVERVIEW

(Last updated Sept 23, 2003 by William Fox)

 

Sometimes I feel like I am more of a “religious deprogrammer” than a stereotypical Wall Street money manager. Somewhat paradoxically, the more I have distanced myself emotionally and intellectually from the mainstream Wall Street scene, the better my investment performance has become.

There are some fairly simple investment themes that I have been pursuing that relate to issues addressed in my papers a “A Bear Case Overview” and “Amidst Bullish Hoopla: A Behind the Scenes Look at Fed Desperation and Intervention Wizardry.”

First, so long as the Fed increases the money supply at over 10% a year, and the US runs record balance of trade deficits over 5% of GDP, in the long run it should be impossible for the Fed to keep long term interest rates this low (below 6%) or prevent the dollar from sliding further against the currencies of less indebted, trade surplus countries. As interest rates eventually rise, and America continues to experience economic malaise, this should hurt the still overvalued overall US stock market. Many of the sources that I list in my “Learning the score” article cover the justifications and likely mechanics of all of this in great detail.

The second issue becomes a timing issue, namely are the Fed and the US Government showing slippage in their ability to reverse or suppress the growing symptoms of this underlying reality? I believe the answer is yes. Therefore the following areas make sense for further examination for investment purposes:

Foreign bond funds
Inverse interest rate funds
Gold and silver-related stocks
Inflation and scarcity-related trends in other commodity-related areas, to include agricultural products and oil and natural gas
Stock market short funds

Another important question involves technical timing issues. No market or sector rises in a steady bull market trend or goes through a steady decline. There are always countercyclical trends along the way. Long secular bear markets are typically punctuated by strong countercyclical bull rallies. The question here involves finding good spots to buy on the dip of countercyclical bear dips within the context of long term bull trends and short at the top of maturing countercyclical bull rallies within the context of long term bear markets.

 




 

 
     

Flag carried by the 3rd Maryland Regiment at the Battle of Cowpens, S. Carolina, 1781

© William Fox. Sometimes William Fox offers viewpoints that are not necessarily his own to provide additional perspectives.