What Does it Mean to “Invest?”

Investing does not just mean throwing money into the stock market and seeing what happens. Economically, to invest is to allocate capital that you could have otherwise consumed, into economic activities which will profit you more in the long run. The investor looks for areas of the economy where there is a chance to better serve consumers than what currently exists. He then directs resources into that area with his investment. The investor is a type of entrepreneur.

Is Investing Today Different?

In today’s economic environment, everything is messed up because the Federal Reserve has done severe damage to “the capital structure.” Central bankers did this by suppressing interest rates and increasing the supply of money in the economy. This creates an artificial boom in which too many “investments” are not consistent with actual consumer preferences. With the central bank going to exorbitant lengths to keep economies “propped up,” one must invest accordingly in order to profit in the boom time, but also be wary of an inevitable “bust.”

Our Interpretive Lens: The Austrian School

We view the economy through the lens of the Austrian School. Austrian economics refers to a certain “school of thought” in regards to economic theory that has its roots in the economic theorists who came out of Austria in the late 19th and early 20th centuries.  Hence the name. We believe that the Austrian School provides the tools to most accurately analyze the economic, monetary, and central banking trends worldwide.

Does Austrian Economics Help with Investing?

Yes and no. Austrian economics does not claim to know where one should put his money in order to make a profit. This is because monetary profit and loss is revealed by the market process; it is discovered in the course of exchange between seller and buyer. However, Austrian economics can help in understanding the overall conditions of the “macro” economy; it can point to inflationary trends, deflationary trends, the effects of the Fed’s monetary policy on the price level of capital and/or consumer goods, bubbles, busts, credit expansion, credit contraction and so on.

How Do We Choose Investments?

Our goal is to help our clients position their portfolio in accordance with several different major trends. On one hand, there is the inflationary (not necessarily consumer price inflation) boom effect that low interest rates and “easy monetary policy” produce. On the other hand, there is the deflationary liquidation of malinvestments that the Fed wants to oppose. These two trends are in a massive struggle against each other. We don’t know which will win. So we have little bits in both, coupled with allocations in various other sectors which might benefit from economic, political, and other global trends.

What Exactly Do We Do?

As a Registered Investment Advisory (RIA) firm, The Sullivan Group can manage all types of investment accounts from IRA rollovers, traditional/SEP/Roth IRAs, brokerage/retail accounts, and more. We help our clients open the right account and, if necessary, help them transfer over assets held at other institutions. The reason we are so fond of Schwab’s intelligent platform is that it allows us remarkable flexibility in regards to our investment options. We can invest in such a way so as to balance our view of the economy with the specific goals and needs of our clients.

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