Episode description
There’s another hurricane that is strengthening. In the form of a global economic downturn. It’s affecting our shores and moving up in Cat strength. Prepare wisely for this one because its looks to be a Category 5 storm, the effects of which could last the next 4 quarters.
Unfortunately, the industry hasn’t prepared you for this. Big banks, financial media, the inexperienced social media personalities, even the Fed, Treasury, and White House. It’s been disappointing.
You will see green on the screen, as these long down cycles are interspersed with bear market bounces. We’ve already had several this year. In the 2000-2002 tech bust, there were about 15. Each setting lower highs and lower lows.
We’ve talked about this many times, but it’s important to repeat. What worked for the last 12 years is not working now, and we’re not going back to that scenario.
We can’t tell you what to do, because that could be deemed advice and we don’t know your particular situation. What we can say is that preparing for hurricanes to strengthen can be helpful. We’re not in the business of trying to time the market. That’s a fool’s game and has wrecked hedge fund managers and retail investors alike. It’s not about being entirely in cash, because there’s always a place to invest. But, sometimes it’s nice to have some cash ready, or as we say”raise cash” during times of high volatility and increasing economic concern. Volatility is high right now, as measured by the VIX. When it’s over 30, as a rule, we don’t try to be heroes trading anything.
We’re not all cash, but we did start raising cash positions at the turn of this year, increasing to present date. We think the future market situation is going to call for a different allocation that what we’ve been accustomed to for the last 12 years.
Stay tuned as we’ll be doing some special content, episodes, and live talks on cash management. It looks to be worthwhile, maybe even fun again to consider how you can manage cash positions in different ways.
Until then, be vigilant, and take care of your hard-earned assets.
Disclosures: This is not financial advice. We don’t know your individual or organizational situation. Consult a professional if you are looking for guidance. We seek research from many institutional sources, work to make sense of it, find patterns, compare date points, and put perspectives together that the public can understand. These views may influence the manner in which we manage assets for clients of our firm.
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