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Strategies & Market Trends : Value Investing
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To: reno4 who wrote (44502)9/22/2011 2:52:49 PM
From: Jurgis Bekepuris1 Recommendation  Read Replies (1) of 78656
 
What he wrote makes sense and is mostly correct.

Regarding "uncorrelated return streams", I don't think this is easy. Like today shows, gold, commodities get shot down too. Pharmas are dangerous if there is a move towards more government controlled medicine (btw, so far Dalio was wrong when he said that in expansions everyone is a capitalist while in recessions everyone is a socialist - the move is definitely not that way in USA, but I don't want to get into politics on this thread). Furthermore, even pharmas lose sales - during 2008/2009 the number of doctor visits dropped significantly as people lost insurance coverage and I am sure this also affected high margin prescription drugs and med devices.

You can hold cash, but in his model it will be inflated like heck. You can try to hold foreign currencies but you have to know how much of them are uncorrelated. The best thing probably is to find self-sufficient, (credit)-expanding economy and invest there (Brazil? India? probably not China). You will still lose money since foreign investors sell assets in that economy to cover their delevering. But you may come out quicker and with better results if/when that economy outgrows the delevering one.

Overall though, the world is interconnected in a lot of ways and true "uncorrelation" is very elusive. Plus what he calls interim "bear market rallies" may yield great returns even in delevering economy. So there's no simple way to "win". ;)
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