Some people criticise me for being too bearish. I don't think I am. I am "suitably" bearish, or cautiously optimistic. Why?
What if I'm bearish, tell my clients to switch to investment grade bonds, CTAs and gold, and risk assets fall 30%? My clients' portfolios will rise between 5 - 20%. I would have made money for them.
What if I'm bearish and I'm wrong; risk assets shot up by 20% and I missed it? Well, with the current cautious asset allocation, my clients' portfolios would still be up by between 2 - 10%. Would that be a great crime? They can always chase returns once a bull run is identified.
Now what about those naysayers who like to gamble with other people's money? What if they go aggressive and turned out to be right? Then good for them. Their clients' portfolios would have been hopefully up 10 - 30% if they bought the right products.
But what if they are wrong and risk assets do indeed tumble 30%? Greece and Italy experienced disorderly defaults? Their portfolios would have been down by 20 - 40% and it would take between 25% and 60% to breakeven. It would have been a painstaking climb back.
So I think I'm doing the right thing by being very conservative now. I've done my return risk calculations and I believe it's the right direction to veer.
