Building Cash or Equivalents MBMG Investment Advisory Commentary

MBMG advises clients to hold significant cash of 10% or more across portfolios for the first time since 2015

Just about all asset class values appear vulnerable to what could be an extreme move in either direction, says MBMG’s Paul Gambles who added that investors should consider taking some profits and either holding a portion of the portfolio in cash or reinvesting some of the proceeds from equities into 20 years or longer duration US treasuries or gold if they don’t already hold these assets.

His comments come as many market participants have become extremely cautious while others cling to views at the opposite end of the spectrum. It’s unclear whether risk is still on or is now off but nobody can deny that cracks have recently appeared. These include fears of rising (or decelerating) inflation depending on your bets placed; a slower than expected Covid-19 recovery which seems almost certain to be happening and the latest financially troubled Chinese company, Evergrande, and the continuing Chinese regulatory restrictions being placed on Chinese big-tech.

“Our advice is to be cautious and rejig the portfolio if you haven’t done so already’. We think that the market is very finely poised waiting for what potentially could be a very, very big move,” Gambles told CNBC’s “Squawk Box Europe” last Friday.

“We’ve got no idea which direction that could be; I realize that doesn’t sound helpful, but frankly there are just so many unanswered questions out there right now,” he said. “Until we start to get answers to those, our advice is actually unless you can really afford to take what could be a pretty big hit, and possibly even a permanent hit, then it is better to just sit on the side lines.” Gambles later clarified that he meant not only building cash for a rainy day but also rejigging the portfolio to either increase equity risk if you have a high exposure to US treasuries or increasing treasuries if your equity holdings have become is the dominant because (and not many analysts will admit to this) ‘it’s a coin flip”

Gambles said that he’d advised to raise cash and cash equivalents, warning that market volatility indicators had “suddenly gone up and off the scale” compared with just 1-2 months ago.

When pushed, Gambles also said that at current levels gold and gold miners were “still an alternative way to hedge risk” if you don’t already hold significant exposure to them.

“Take your profits,” Gambles said. “You should be able to swallow your fear of missing out rather than expose yourself to the risk of what could be some pretty significant losses if we get a reversal.”

“We are not saying that there is an absolute crash nailed on here, far from it. What we are saying is it’s a coin flip as to whether things are good or things are bad and, you know what, it has got the potential to be pretty extreme in either direction,” Gambles said.

Not since 2015
He said it was the first time he’d advised clients to hold significant cash of 10% or more within portfolios since 2015 and the other times were 2011 and 2008.

MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.

For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.

About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner. 

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