Our Philosophy

We believe that in order to properly understand investing, one needs to understand economic cycles.

We believe that long term economic cycles are predictable and certain asset classes perform better in certain economic cycles.

Economic Cycles

In 1925, a Russian economist by the name of Nikolai Kondratieff published a book titled "The Major Economic Cycles". In it Mr. Kondratieff stated his view that capitalist economies move in boom and bust cycles with each full cycle repeating itself periodically. Some present day economists building on Kondratieff's work have defined these "Kondratieff Waves" as 4 sub cycles, naming the sub cycles after the 4 seasons of the year: spring, summer, autumn and winter. We believe, after a study of economic history, that Mr. Kondratieff's cycle theory is accurate.

The Four Sub-Cycles

During spring, an economy experiences a gradual increase in business and employment. Consumer confidence gradually increases. Consumer prices begin a gradual increase compared to levels seen during the previous cycle (the winter cycle). Stock prices rise and reach a peak at the end of the spring cycle. Interest rates begin to rise from historically low levels and credit gradually expands. At the beginning of the spring cycle overall debt levels are low. (In our view, this most recently represents the time frame of 1949 - 1966)

During summer, an economy sees an increase in the money supply which leads to inflation. Gold prices reach a significant peak at the end of the summer period. Interest rates rise rapidly and peak at the end of the summer. Stocks are under pressure and decline through the period reaching a low at the end of the summer cycle. (In our view, this most recently represents the time frame of 1967-1982)

During autumn, money is plentiful and gold prices fall reaching a gold bear market low by the end of the autumn season. During autumn there is a massive stock bull market and much speculation. Financial fraud is prevalent and real estate prices rise significantly due to speculation. Debt levels are astronomical. Consumer confidence is at an all time high due to high stock prices, high real estate prices and plentiful jobs. (In our view, this most recently represents the time frame of 1983 - 2000)

During winter, an economy experiences a crippling credit crisis and money becomes scarce. Financial institutions are in trouble. There are unprecedented levels of bankruptcy at the personal, corporate and government levels. There is a credit crunch and interest rates rise. There is an international monetary crisis. There are pension funding problems and the price of gold and gold related equities rise. (In our view, we have been in the winter cycle since 2001)

The company believes in utilizing exit strategies and asset classes that can, in the company's view, produce absolute returns in any of the sub-cycles.

There is no guarantee that absolute returns will be achieved. Past performance is not an indicator of future results.