September, 2010 Archives


What Is Your Theory of the Global Investment Environment?

by Riaan Nel in Graduate Research

All investment strategies have their roots in an underlying economic theory – the way the proponent of the strategy sees the world.  The success of an investment strategy is fundamentally linked to the validity of the underlying world view of the proponent. 

A significant proportion of the professional investment advice community is still caught up in a world view that is not valid any more.  We are entering a “new normal” to use a phrase popularized by PIMCO’s El-Erian, yet most financial advisors, investment newsletters, and personal finance magazines are stuck in the “old normal.” 

Below I explain the economic theory underlying the new normal, and our investment strategies.  (By the way, this theory was the only theory that actually predicted the financial crisis, and the theory is currently being discussed by the Federal Reserve).   

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