“Hidden In Plain Sight” Thoughts and Takeaways from the 2014 Wine Country Conference

FPA

Steven Romick

Research

8 Pages

FPA examines how ultra loose monetary policy and historically expensive markets are distorting investor behavior, leaving few attractive opportunities despite strong equity performance. The commentary argues today’s environment resembles a liquidity driven experiment where patience matters more than chasing crowded trades or compressed risk premiums.

Key Takeaways

Risk Premium Compression: Spain and Italy traded just 50 bps above 10 year U.S. Treasuries, while Mexico issued a £1.66 billion 100 year bond yielding only 5.75%.
Limited Value Opportunities: The percentage of Russell 3000 stocks trading below 13x trailing earnings approached multi decade lows in 2014, reinforcing the fund’s cautious positioning and elevated cash exposure.
Defensive Positioning Maintained: Equities averaged 50.8% exposure during Q1 2014, while cash and equivalents represented 46.39% of net assets amid scarce “fat pitch” opportunities.
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