Q & A. Money Flow Analysis

Part of our occasional series of answers to questions posed by readers:

Question: You write often of money flow analysis. What do you mean by that?

Answer: Money flow analysis is a process we use to measure liquidity. It starts with the basic principle that investors reward positive economic development by injecting liquidity. They also punish negative economic events by removing that liquidity. Liquidity is defined by us as either cash or credit. We look at liquidity across three time :

-Short Term {Days-Weeks}

-Intermediate Term {Weeks to Months}

-Longer Term {Secular}

Liquidity can be measured. Simplistically bullish cycles show more buyers than sellers. Bearish cycles show more sellers than buyers. We have developed systems that measure this liquidity and we incorporate those measurements into our investment analysis. Money flow analysis is part of our overall investment matrix. The investment matrix is as follows.

-Market Structure
-Investment Paradigm {the disciplines listed below are incorporated into this.}
Fundamental Analysis
Valuation
Money Flow Analysis
-Portfolio Monitoring
-Sell Discipline

At some point possibly later in the summer I'll try to do a more in depth post or series of posts on this subject!