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 MBMGโs 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 donโt 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. Itโs 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.
โOur advice is to be cautious and rejig the portfolio if you havenโt done so alreadyโ. We think that the market is very finely poised waiting for what potentially could be a very, very big move,โ Gambles told CNBCโs โSquawk Box Europeโ last Friday.
โWeโve got no idea which direction that could be; I realize that doesnโt sound helpful, but frankly there are just so many unanswered questions out there right now,โ he said. โUntil 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.โ 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 becauseย (and not many analysts will admit to this)ย โitโs a coin flipโ
Gambles said that heโd advised to raise cash and cash equivalents, warning that market volatility indicators had โsuddenly gone up and off the scaleโ compared with just 1-2 months ago.
When pushed, Gambles also said that at current levels gold and gold miners were โstill an alternative way to hedge riskโ if you donโt already hold significant exposure to them.
โTake your profits,โ Gambles said. โYou 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.โ
โWe are not saying that there is an absolute crash nailed on here, far from it. What we are saying is itโs 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,โ Gambles said.
Not since 2015
He said it was the first time heโd advised clients to hold significant cash of 10% or more within portfolios since 2015 and the other times were 2011 and 2008.
MBMG Investment Advisoryย is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.
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About the Author:
Paul Gamblesย is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.ย
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