First, investors should avoid the most overvalued assets, where irrational behavior is evident. Second, they should focus on what’s unloved and still relatively inexpensive, including European periphery sovereign, bank debt and equities. Finally, they should keep liquidity high and use hedges against a rise in interest rates and volatility.
1. How is an investor to know which assets are currently "overvalued"? We usually only find that out after the "overvalued" assets have crashed in value, and then it is declared that previously they were "overvalued".
2. Same thing with determining what's unloved and inexpensive.
3. What does it mean to "Keep liquidity high"? If you own stocks, you can buy and/or sell them any day, so any stock position is highly liquid. Is that what the writer means - keep liquidity high by buying publicly traded stocks rather than illiquid Monet and Picasso paintings?
4. As for "Use hedges against a rise in interest rates", this has been a losing position for the past decade in the USA, and a losing position for 25+ years in Japan.
5. As referenced in the article, $100K invested in the S+P500 in 2009 is now worth $300K. Be skeptical of advisors who choose the absolute trough of the market as a starting place to make a point about anything.
I say poppycock. Buy stocks that will grow revenues and earnings faster than the market, and you'll be fine.
In a nutshell, SIMO baby! |
