The market has been frustrating for us lately, as secondary forces have begun to outperform the primary trend that has enabled us to so consistently beat the S&P 500. As our philosophy states, at times we will get out of sync, but we prefer to ignore these short term trends in order to keep the big picture in place. What works for Oristano is a weak dollar, strong Yuan, strong growth in emerging markets and their currencies. What is taking place currently is a strong dollar (Greece remains a problem), tightening of credit in emerging markets (fears of inflation), and an over supply of commodities (possibly the result of over stocking by China). It is my humble opinion that these are short term events. The dollar will certainly weaken again as the problems are resolved either by the EU or the International Monetary Fund; the Yuan will rise to promote domestic spending and reduce the fear of inflation helping China and other emerging markets as well, and commodities will resume their upswing as global demand and a weak dollar reassert themselves.
Look Over the Valley
Written by Joe Pickard on March 23rd, 2010 As I’ve stated many times before, the reason for our superior performance is that we have gotten the macro right. In a secular bear market, one that I believe we are in now, what works best: emerging markets (in the ‘66-’82 bear market it was Japan), commodities (weak dollar and inflationary fears), and small cap domestic securities (largely because they’ve been so neglected). If you’re a good trader, you can do well playing short term counter cyclical secondary trends. This is difficult at best to do, and so I prefer to look over the valley and stick with the longer term trends. Patience is prudence.