This picture is from the North Rim of the Grand Canyon. Our training today was another 9-miler. Next week we are going to kick it up to 12 miles.Forbes.com has an article up written by Will McClatchy from ETFzone.com (I wrote two or three articles for ETFzone in 2004) that explores the notion of whether or not to take defensive action in a portfolio.
Long time readers will know that I am a fan of occasionally taking defensive action with an eye toward trying to sidestep a portion of a big move down.
While I agree with the idea from 30,000 feet I'm not sure the method Will mentions is ideal. In the article he notes the long list issues confronting the market today and he is correct that the list is scary. However it is not new or unique.
It could be argued that the list of worries from the summer of 2002 was worse that what we have now. I'm not saying 2002 was absolutely scarier, but it might have been. Of course the summer of 2002 was very close to a big market bottom.
I think that a get defensive plan is a must but I think some sort of objective trigger that is market related as opposed to sentiment based is a better way to go. There are many instances in history where markets go up when sentiment stinks.
Various indicators reveal supply/demand problems for equities which I think are more reliable than India arguing with Pakistan.
I should note that Will's article does not advocate very extreme cash level but a lot of people managing their own portfolios like to raise a lot of cash when they think declines are coming.
One thing to consider in getting defensive is dividends. There are a lot of products with big dividends, less beta and a low correlation to the stock market. From the stand point that 100% cash is too extreme, a tilt toward this type of stock or fund makes a lot of sense. The WisdomTree ETFs could fit here but it may be too soon to know for sure.
3 comments:
Seems like getting defensive is the rage. Perhaps we all need to review Jimmy Carter's four years and his malaise/misery index/weak military to appreciate where we have come since 1980, and, unfortunately, where we will be headed back to after the next round of elections and act accordingly with our portfolio(s).
NICE PICTURE POST...WHAT A BEAUTIFUL VIEW!
Yeah, the moves in PG, JNJ, PEP, and the like tell you that the "get defensive" thing is about 75% played out. So, what's next? Even CNBC has caught on to it.
Just for laughs, probably a huge move in all the stuff people panic dumped in May and June. (EM, metals, industrials). Or not.
The article referenced does not seem worthy of mention by Roger's higher standards. IMHO. Poorly written, loaded with advertisement, and where is the defnesivensess?..I quote:
"now is a good time for long-term buy-and-hold investors to exploit excessive bearishness and to seek relatively full exposure to U.S. equities."
Post a Comment