Friday, May 6, 2011

Crisis, What Crisis?

In February 2010 I became a technical sub-advisor to Stonebrooke Asset Management Ltd. who manages the Hybrid Investment Program under the Elite Wealth Strategies program for Union Securities Ltd. In other words Union have a program that uses the joint skills of a fundamental and technical analyst to manage their client portfolios. Our objective for the most part is to enjoy the returns of a bull market and to not enjoy the losses delivered in a bear market.

Of course every asset manager has the same sales pitch, holding themselves out to be different with some in-house “black box” that generates buy and sell signals.  

We simply remain for the most part fully invested with a view to control risk by shifting in and out of asset classes. For example the recent bearish stampede out of the commodity space is typical of too many investment sheep in the same space at the same time. The “noise” that triggered the stampede was the CME Group announcing a series of margin requirement increases for gold and silver futures.

Here are a couple questions I get on a daily basis:

Q) Anyone can generate positive returns is a bull market but what happens when you get a nasty correction triggered by some unforeseen event like the recent collapse in the price of gold, silver, copper and crude?

A) That was a sector crash – in a bull market the money will move from place to place and so the idea is to pick a group of sectors – arrive before the sheep and leave when the space gets over-crowed. The recent “crisis” was centered on the commodity space with the technology and health care sectors unaffected.

Q) What about new money? All well and good to get long in mid 2009 but what about now? Why not wait for the next crash?

A) There is always an excuse not to get invested. Who do you know who got invested in March 2009 when most were engaging in panic selling? If you wait for the next crash you may wait for years, since 1970 there have been only FOUR meaningful or material crashes or granddaddy bears 1973-1974, 1987, 2000-2002 and in 2007-2008.

So I hope that helps. Investing like life is not a spectator sport so get in the game.


Piazzi said...

I thought you might like this about David Rosenberg said...

Love it!

David Rosenberg is an economist and as such has no knowledge of the stock market, but he gets scary when he dabbles in technical analysis. I wonder if he does karaoke?

Bill Carrigan