It's been a terrible week. Tonnes of portfolios to rebalance. I basically could not have predicted this crash, although there was a warning sign that I ignored out of a forest of indicators. If out of 10 indicators, only 1 pointed to danger, am I supposed to run?
Things at work hasn't been easy too. My team is headed for a direction that I feel uncomfortable with. The corridors of power threaten to take away a certain amount of autonomy and intellectual rights. I cannot be expected to follow strictly to a set of portfolios because every situation is dynamic. There should be room for advisers to adjust otherwise why hire CFAs and CAIAs to advise? All you need a junior advisers to identify the risk profile of client and choose the correct cookie cutter portfolio.
Perhaps it is time for me to look around. The longer I stay, the tighter regulations become. I've been trying very hard to change the way the organisation does things. To align the interests of the clients and advisers. But most financial institutions, like in Wall Street, are after short term profits.
Finally, I've taken a big step to recommend CTAs for around 30 - 40% of the portfolio. I am advocating around 10% into Amundi Volatility World, 30% into Man AHL Trend or Winton, 40% into Templeton Global Bond Fund SGD Hedged and only 20% into Emerging market equities.
The dead cat bounce that occured in the last 2 weeks as expected fizzled out and I am starting to short again. Credit spreads have continued to rise. VIX hovered between 35 - 45. TED Spreads hit a new high of 30 bps, unseen since 2008. The 3 month USD LIBOR OIS spread has also hovered around 20 - 25 bps.
I am expecting another 10% - 15% downside before we see a meaningful bounce. QE3 is unlikely to happen until next year because core CPI in the US has hit 1.8%. Austerity measures will drag global economy down. Export dependent economies in Asia will suffer contractions in exports.
On the other hand, what's positive is insiders buying and companies engaging in share buybacks unseen since early 2009. This is another indicator that stocks offer good value. M&As are likely to increase as companies seek earnings growth through acquisitions in the absence of organice growth.
The signal is still very mixed but I am starting to get bearish. On a scale of 1 for bearish and 10 for maximum bullish, I am around 3/10. There's a saying that goes, "once something is wrong, always be the first to get out". I believe strongly in that.
