Fears of an economic slowdown or worse have all but gone away over the last few weeks as the latest key data points indicate that the U.S economy is on stronger footing-stronger than most of the pundits expected. Growth has begun to rebound from a weak fourth quarter and beginning of the year.
The U.S economy appears to have repeated its pattern of the last few years of advancing strongly only to be followed by a period of subpar growth only to be followed by another period of stronger growth. A mindset shift appears underway as the glass now seems half full from half empty. This shift has had a profound impact on investors who have gone long economically sensitive stocks, covered industrial commodity and energy stocks and added to their overall stock exposure.
Fortunately, for Paix et Prospérité investors, we made these changes a few weeks ago as anyone who has been reading our blogs can attest. Our performance has far outperformed all indexes while still remaining approximately 94% net long. Last week I presented at the "Best Ideas" conference hosted by Investipedia and Craig Kaufman. There I discussed many of the themes that I have been writing about over the last year including:
1. You need to have a true global perspective with a systems theory approach to investing; monitoring the key economic, financial and political variables but equally as important, understanding the interdependencies-both internal and external on all the global economies and markets.
2. You need to have and continually recheck your core investing beliefs to provide and maintain a strong compass for investing
3. You need to control risk and maintain excess liquidity at all times
4. You need to do independent in-depth research on each investment for yourself.
5. You need patience to let situations unfold whilst monitoring them closely to see if they remain on course or not and adjust your investment accordingly in light of this.
For those of you who missed the conference I also discussed how the investor and allocators must change many of their past practices such as:
1. Their need to engage a global investor for each asset class rather than a regional one.
2. Their need to pay more attention to the CIO and the structure of the investment team rather than checking the boxes. For instance, Paix et Prospérité has outsourced almost all of the mid-and back-office investing rather than on administration.
3. They should consider separate managed accounts if the assets are large enough rather than being part of a fund. There are a multitude of reasons why that favor the investor and also fare well for the fund manager, too.