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The emails are arriving from clients, the media and people newly interested in our services and the questions are all the same. They are all in search of one answer: what in the world is going on? Is this the worst time in history or the best time in history to be a buyer? The range of questions go from extreme to extreme - do we cash out entirely or do we put it all to work right here, right now? Either could be right and one will be proven to be correct, though the right strategy could change based on when you look at the perceived results!
Our most honest opinion is the best strategy is the one we are currently deploying, and that is one of "wading." This is true both of individual positions and overall allocations. We would always suggest you wade into a pool of cloudy water, and the equity markets are rarely clear even in the best of times. We believe you wade into the market at this point if you are entirely in cash. We also believe you should wade out of the market if you have all your resources in equities. How can both answers be right? They can't and we have to accept that. The job is to make the best decisions you can with the current facts at hand.
Portfolio Discussion
Individuals all have specific needs and portfolios should have the same premise - a specific purpose. One large issue we find is the professional financial industry, as well as self asset allocating individuals, examine the past occurrences of the market to "frame" particular beliefs and expectations. The very same people then tend to use that "frame" to draw out what they anticipate should and will occur into the future. Everything goes along as planned until the picture in the frame changes more dramatically than the artist had anticipated! Suddenly the decision making process is called into question and judged based on the immediate issues at hand. That can be both good and bad - it is all in your perspective.
The canvas now has a new view and uncertainty enters the equation. It is more than just emotion. Some things have clearly changed. Do you throw away the canvas and start from scratch? Do you try to paint over the imperfections that exist to get back to the original plan? Do you take what you have and begin to create a new and different picture? We are personally witnessing a world with massive divisions and "artists" moving in all three directions. Our preference is the latter, of course, but they are each worthy of discussion whether good or bad.
Throwing out the canvas and starting fresh is our version of a complete change, selling everything and going to cash or taking all your cash and buying all you can. Clearly there are more people leaning toward the first thought as individuals, but there are some on the other side as well specifically large money centers. (The appearance is of the larger assets moving in, not out, for the record.)
Taking all of your current holdings and going to cash will certainly let you sleep better tonight, or most think it will! In reality, we have watched people not be able to sleep with the market volatility and then go to cash, to only watch them lose sleep in fear that it goes up without them! Aren't emotions simply grand?
We are commonly asked what to do right here and the answer for the right action in most professional circles is based entirely on your stated objective or need. We argue differently. What you choose to do must include that you are willing to stick to that strategy unless the facts absolutely change. The decision you make right now will only prove to be right or wrong if you are willing to stick to the plan. If you are incapable of that, then I most certainly promise your choice today will have little importance to your long‐term future.
Please notice I said stick to a strategy, not to a stock or mutual fund. The decision making process needs to be iron clad and protected from emotions. The individual holdings must be held in the highest scrutiny. We have reached a place where we have discussed changing consumer patterns for as long as most of you have known us. The strategy must be rigid yet offer the ability to be flexible in implementation.
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