It’s more than a Wall of Worry

I just wanted to point out some headlines from today and discuss portfolio construction a bit. 

As you know, I have pulled in my horns. I am not short the markets, but I have moved towards market neutral with more cash on hand and some hedges. 

I don’t believe that the globe can avoid a serious market event in the next few years. What is frustrating to people is not knowing exactly when it will be. If I had to know for some reason, I’d say 2017. April to be specific. How’s that for crystal balling it? 

Of course it doesn’t matter exactly when it happens, so long as we are prepared. By hedging a bit now, we are preparing. Since I think at least a 10% correction is in the imminent future, our hedges are relatively low risk to us.

Remember, these are hedges, not outright speculations which would carry more weight in our portfolios. When I become outright bearish, I will put together some bets to make a lot of money on the move. 

As you have come to watch me trade, you know I don’t day trade. You also know I stay away from most swing trades. However, my swing trades are consistently trying to hit homeruns. I don’t bother with 10% and 20% moves as a target. That’s not enough upside for me to risk principal. When I swing trade, I want to know there is at least a solid chance I double my money on that trade. In this way, I can make several bets, some can lose half and one or two can even lose 100%. By having a few that make triple digits though, I can average out to big market beating gains that drop directly to the bottom portfolio line and put space between me and index measures (which are stupid, but pervasive). 

While some want me to make more stock picks, I think the most prudent thing to do is stay out of the way with a large portion of our portfolios. Avoiding risk is a pick. 

Here are just a few headlines to think about – all from yesterday’s and today’s batches of 151 email alerts I’ve gotten:

Russia: Reviving the Pacific Fleet

Saudi Arabia and Iran Compete in Yemen

Conversation: Yemen Spirals Out of Control

European stocks pull lower despite brighter German sentiment data

Dollar rises on strong inflation report, Greece fears

Dow Transports are calling bull on the stock market’s rise

George Soros: Greece “Lose-Lose” As Debt Concessions A Must

Illiquidity And Bubbles In Private Share Markets: Testing Mark Cuban’s Thesis!

Commodities Carnage; Reversion To The Mean And The Growth Illusion; Net-Nets

U.S. stocks tank as technology, biotech bleed

There are literally dozens more worth reading in other publications than these few. The bottom line, is that if you have any doubt in your mind that we are seeing more than a “wall of worry” to climb right now, then I think you are mistaken. 


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