OUR PHILOSOPHY

At Montgomery Capital, we constantly survey the financial landscape for investment opportunities that appear to offer excess returns for the risks involved — wherever that takes us. Investment returns are extremely time sensitive, meaning that your results depend primarily upon what particular asset categories you are in — stocks, bonds, cash — at what particular times.

For example, during the past twenty years stock prices have been extremely strong, and so almost all investors have done well — but that's very unusual. Historically there have been long periods of time — such as the late twenties to the early forties--when stocks did nothing but go down. That's two whole decades of losing money in stocks. We had decades, such as the early sixties to the early eighties, when stocks went sideways. We've had long periods of time when bonds were the best investments — or real estate — or commodities. Sometimes T-Bills are the best investment.

We've been in the business over thirty years and we've gone through many such periods, and what we try to do for clients is to use our experience and research and trading models, to constantly move assets to whatever areas appear hospitable at the time.

The stock market has been enjoying its "summer" for nearly 20 years, but seasons change, and there will be periods — probably fairly soon — when stocks will do very poorly, but other assets will do well. We see ourselves not as stock pickers or bond pickers but rather as stewards, whose job it is to protect our clients' assets in bad times as well as good; to manage their wealth regardless of what Stocks, or Bonds, or Real Estate, or Interest Rates may be doing at the time. We try to shepherd our clients' assets through the ever-changing seasons that all investment markets go through.

We believe that there is something missing in the current equation of money management. Standard economic theory says that stock prices represent the sum total of the future cash flows discounted by long-dated interest rates. But if you go back in history, that theory doesn't describe a fraction of the actual behavior of the stock market. The market often moves dramatically above or below where economic fundamentals say it should be. The reason is that people aren't cold mechanical computers; and so most human behavior — including economic behavior — is not explainable by an equation . There are laws that govern most human behavior, but you don't find them in the economic textbooks. Anybody who's ever been in love, or ever been in a fistfight knows that humans don't behave like computers. Since anything that influences human behavior influences the investment markets, there is a great deal missing from the textbook approach. In our analysis of market conditions, we add numerous psychological measures to the equation. We believe that it is important to understand the psychology of the market, because some of the greatest gains and losses are not based on interest rates or earnings but are based on swings in investor psychology.

When you purchase a security that you think is a value, it is generally sold by someone who thinks that it is not a value. And when you get into the investment markets, you are competing with some of the smartest, most experienced professionals in the world--so you need an edge.

The second critical point is that the capital markets — stocks, bonds, real estate, cash — are cyclical. Since 1990 we've been on an up cycle. But over the next decade or so, things are likely to be much more difficult than they have been to this point.

For both of these reasons, if you have significant wealth to invest and protect, it will become increasingly important (1) to be flexible; and (2) to have some edge. Our hope is that our flexible approach and our original research provide our clients with unique advantages over the months and years to come. If your goals and objectives match the style of management we offer, we welcome your further inquiry.