Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Volatility Reigns the Day….Yet Again

Posted on | October 8, 2008 Time: 10:09 pm |

I still can’t believe that the VIX closed at over 57 today…where does the volatility ride end? We are in utterly uncharted territory - so uncharted that finding our way out will involve more than just historical comparisons.

It will take a new type of holistic analysis, a “model” if you will that uses historical patterns as its framing material, but incorporates modern variables that simply can’t be ignored. Our global financial markets are interconnected enough today to make 1987 & even 2000 market comparisons moot. This trend will only increase through the merging of global exchanges and centralized currency trading. Global wealth has been massively redistributed since the last time we saw a global financial crisis. These are just two of many game-changers that challenge us to come up with new ways to value and predict assets.

But with so many rules of the game still changing, who among us can be expected to have full confidence? I feel that right now, this moment in time, is perfect proof that investing based on secular trends is the way to long-term success. Long-term changes in the world, in industry, to our world economies - these will determine stock prices 5, 10, 20 years from now. The fact that the eye of the world is on the minutae of right now is a benefit to those who can look just a little bit beyond. From a long-term perspective, the prices of many, many stocks looks fantastic.

You could start to see some focused buying today, just here and there amidst an overall jumpy and negative day. Some of the basic materials like Freeport-McMoRan (FCX) and Potash Corp. (POT) - both Secular Trends holdings - were up over 10% on strong volumes. Basic materials eked out a small 1.5% gain on the day and was the only sector in the green. Energy was essentially flat, and there were a few concerted buys in that arena as well. All in all I see this as a promising sign, some modest proof that investors are starting to peek at the fundamentals again.

The Secular Trends Portfolio managed to earn a small return today, but outperformance doesn’t mean so much when you’re still down 10%. I still have plenty of powder in the keg, and once the earnings season gets into full gear we should begin to see how bad the “FiNuclear” fallout truly is.

Ryan Barnes

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