Investment Philosophy


Deficit spending is simply a scheme for the confiscation of wealth.  Gold stands in the way of this insidious process.  It stands as a protector of property rights."            - Alan Greenspan, "Gold and Economic Freedom", 1966

AFCG's guiding mandate as an investment advisory firm is to protect and grow our clients' standard of living in real (inflation-adjusted) terms through changing markets and economic cycles over time.

We integrate an analysis of fundamental, technical, monetary, geo-political, and behavioral finance factors to develop a "big picture" assessment of the global investment environment.  From there, we further refine our analysis into actionable investment themes that are incorporated into each client's financial plan and investment portfolio.

This analysis is defined by three core philosophical aspects:  

  • Austrian School of Economic Thought
  • Adaptive Portfolio Management
  • Absolute Return Investing 

Austrian School of Economic Thought

To analyze how government actions and monetary policies impact the economy and global financial markets, we employ a top-down framework grounded in the Austrian School of Economic Thought ("Austrian School").

The Austrian School's business cycle theory focuses on analyzing central bank-sponsored monetary policies that tend to increase the money supply, distort market interest rates, and cause boom-bust business cycles.  These cycles are typically characterized by loose credit conditions, asset bubbles, and large-scale malinvestment that permeates an entire economy (e.g., the U.S. real estate/debt bubble from 2002-2007).

One of the defining characteristics of the Austrian School is that it challenges the economic theories advocated by more "mainstream" schools of thought such as Keynesianism, which support deficit spending and government activism in the economy.  The Austrian School is also skeptical of the ability of certain statistical-oriented modern finance theories and models to reliably measure risk without using logic and acknowledging human nature.

Instead, the Austrian School attempts to derive economic analysis by focusing on the basic laws of economics and principles of human action that manifest in the financial markets.  Additionally, Austrian School economists believe that government policies distort the price system that helps allocate scarce resources in the marketplace.      

Through our Austrian-based approach, we attempt to establish "cause and effect" relationships between monetary and fiscal policies that devalue the U.S. dollar and the resulting capital flows in the financial markets.  Applying an Austrian School analysis in an attempt to identify market-moving liquidity rotations in and out of various countries, asset classes, and business sectors forms the basis of our investment strategy.

Charlie Atwill has been featured in the Financial Adviser blog of The Wall Street Journal discussing the topic of Austrian School economics and investing.  A link to the article is available here

For more information about the Austrian School, please click here and here.


Adaptive Not Passive

Managing investment risks to avoid significant financial loss is a dynamic process that should account for the cyclical nature of markets and economies. 

More passive investment strategies such as "indexing" and "buy and hold" (or "buy and forget") rely on what we believe are outdated academic theories and backward-looking statistical data that often belie the actual amount of underlying risk assumed by some asset classes during certain cycles.  We prefer a more active investment style that uses a real-time, forward-looking analysis to determine when the return profile of an investment justifies the perceived risk and when it does not. 


Absolute Return Investing

We strive to achieve positive investment results through any type of market and economic environment by proactively adapting portfolios to both bull and bear market cycles across multiple asset classes.

Some key characteristics of an Absolute Return investment approach are:

  • Seeks to provide positive investment performance during both boom and bust economic cycles.
  • Invests in a broad array of assets classes beyond conventional U.S.equity and debt securities (i.e., gold/silver, natural resources, and foreign stocks/bonds) for diversification and inflation protection. 
  • Designed to reduce portfolio exposure to extreme downside volatility amplified in bear market cycles.
  • Emphasizes the realistic time horizon of the non-institutional, retail investor.

By contrast, many conventional investment strategies rely on a Relative Return approach.  Relative Return strategies predominantly seek to achieve positive investment performance by assuming that, over the nebulous "long-term", markets move in one direction--up.  Long-only mutual funds, passive indexing, conventional U.S.-centric asset allocation, and the familiar "buy and hold", are all commonly used Relative Return styles of investing which depend on longer term positive trends.

In our judgment, Relative Return strategies are problematic in that they severely discount or ignore valuation cycles, extreme levels of public and private debt, the potential for rising interest rates, economic dependency on oil imports, and increasing geo-political tensions, all of which can create extended periods of excessive financial risks.   Relative Return strategies also assume that monies invested in portfolios will be withdrawn only during positive market environments. 

Our Absolute Return approach acknowledges the existence of these risk factors and the cyclical nature of markets and economies which, in effect, helps us orient investment portfolios with what we think are the prevailing economic currents and market trends--not against them.   

AFCG implements its core investment philosophy through our Tactical Asset Allocation strategy utilizing four different investment models by objective.

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