Includes equities, real estate and hybrid bonds.
After he got his MBA, Alan Longbon became a town planner and then a land developer. Based in Australia, he is now a full-time private investor focused on managing family assets.
How he invests
Mr. Longbon's investing is guided by the notion that economies and financial markets move through long cycles of expansion and contraction. The time to take risks and make investments is when the milestones that mark the expansionary phase are still visible – for example, stimulative monetary and fiscal policies.
He has also observed that the stock markets of countries around the world vary widely in performance. In 2016, for example, an exchange-traded fund (ETF) for Brazil gained 85 per cent while Nigeria's fell 33 per cent.
Mr. Longbon seeks to identify country ETFs with the potential for substantial gains. Two key criteria are:
- The government is pursuing expansionary fiscal policy and;
- The trade balance is becoming increasingly positive. This means funds are flowing into the private sector, which supports the stock market.
He is currently bullish on Canada. As discussed in his article "Canada is a Buy" on seekingalpha.com, Mr. Longbon is encouraged by the Liberals' decision to abandon fiscal austerity, as well as signs the Canadian trade balance is turning toward surplus.
Another of his investment strategies is buying "hybrid bank bonds." These are bonds with equity-like features such as the ability to suspend interest payments and force conversion into equity whenever the issuer comes under extreme stress.
"I buy these [bonds] because at present, banks are being forced by the BASEL [a regulatory body] agreements … to hold more capital [and] they have to make these bond issues at bargain prices …," says Mr. Longbon.
Given the tendency of the bonds to increase in price right after issuance, he uses leverage to buy a large position. If there is a substantial gain after a week or two, he'll take profit. If the bond's price doesn't surge, he'll "hold and earn interest that more than covers the leverage costs."
"My best trades have been buying the dips with confidence since the crash in 2008," he notes.
Currently, it's being too early on selling short the euro.
Investors should learn more about financial and economic cycles, he advises. Recommended authors include David Ricardo (especially his concept of the "law of rent"), Fred Harrison and Phillip Anderson.