There’s No Place to Hide in This Market

[yankees60]

From Bernstein's new book:

There’s No Place to Hide in This Market

Hyman Q. Hackwriter         May 15, 2022

Nothing seems to work anymore. According to research firm Coinflip Analytics, the S&P 500 is down more than 15% for the year; the widely followed Blimber Aggregate Bond Market Index is off 14%, and what investors had heretofore considered the safest bet of all, the long Treasury bond, has seen a third of its value amputated. Tech stocks? Utilities? Cryptocurrency? Fuggedaboutit.

According to Paul Pecksniff, an equity strategist at wealth management firm Churnum, Burnum, and Howe, “Valuations are stretched, credit spreads have widened, and the market is anxious about Sweden and Finland joining NATO.” He favors companies with wide moats selling at bargain prices, such as the digital currency giant CoinSmash and BoingBoing Technologies.

“I’m scared to death of stocks right now,” says Brian Smallsaver, a twenty-something programmer and social media influencer. “And what’s the deal with bonds? Aren’t they supposed to save my bacon when stocks get creamed?”

“A lot more air’s coming out of the market’s tires,” says Fritz Mozillo, economist at Jones James, an independent brokerage firm headquartered in Boca Raton. “We’re telling clients to batten down the hatches and keep a sharp weather eye on the Fed.”

One casualty of the recent turmoil in both the stock and bond markets has been the traditional 60/40 portfolio, which an increasing number of observers consider obsolete. One of them is Frederick Fintwinch, chief portfolio manager at mutual fund giant GreenStone, who told me via email: “The conventional asset class correlation grid has gone to 1.0, and you’ve got to think outside the investables box.” He recommends prize llamas, rare Prussian postage stamps, and celebrity belly button lint.

I reached out to Dermot Landsdale III, CEO of Gigantic Global Capital, who conveyed even deeper worries from the World Economic Forum in Davos: “What we’re seeing now is a titanic battle between buyers and sellers, compounded by central bankers around the world who have deployed a dangerous mix of pushing on a string, trimming their sails, and mixing their metaphors.”

Retail investors have become increasingly distraught at the lack of shelter for their shrinking portfolios. Retired 79-year-old dentist Percival Sweedlepipe had placed most of his IRA assets into the Dolittle Technology Fund and feels betrayed by the media’s breathless coverage of its manager, Fred Wopsle: “If you can’t trust The Wall Street Journal, The New York Times, and Kiplingers, who can you trust?”

[Smith1776]

Thanks for this post, Vinny. Noting the date.

It's amazing how much changes in a year. The sentiment in this passage you posted is such that people were wanting to de-risk just as risk premiums in both stocks and bonds skyrocketed. That Brian Smallsaver fellow said he was "scared to death of stocks" at precisely the time in which the reward for bearing said risk had just gone up. Such is human nature, that our instinct drives us to behave in the exact opposite way that is conducive to good investment results.

Shameless personal plug here: the year-to-date result for the All-Terrain Portfolio at the time of that article was a loss of only 3% or so.

[yankees60]

Thanks for this post, Vinny. Noting the date.

It's amazing how much changes in a year. The sentiment in this passage you posted is such that people were wanting to de-risk just as risk premiums in both stocks and bonds skyrocketed. That Brian Smallsaver fellow said he was "scared to death of stocks" at precisely the time in which the reward for bearing said risk had just gone up. Such is human nature, that our instinct drives us to behave in the exact opposite way that is conducive to good investment results.

Shameless personal plug here: the year-to-date result for the All-Terrain Portfolio at the time of that article was a loss of only 3% or so.

That was exactly the intent of the satirical column. To demonstrate how much contemporary personal finance opinion is either worthless or, even worse, dangerous if followed.