Getting a lot of feedback lately from clients who have taken note of what they view as a decidedly bearish shift on my part over the past several months.


Well, I definitely get that, however, when we look at our target core mix of assets, while indeed it has a more defensive tilt than we’ve maintained over the past 10 years, it’s clearly not outright bearish.

In summary, for portfolios with the tax profiles, and the size, to completely capture our targets, we’re presently:


45% U.S. Equities
25% Foreign Equities
20% Currencies
10% Alternatives


Plus we’re maintaining an out-of-the-money (cheap) S&P 500 put option as insurance against a major market collapse.


Note: The above occupies the non-fixed income portion of client portfolios. Meaning, if a client has, say, a 60/40 target, 60% is allocated to that mix. 


Now, within U.S. equities, we’re notably more weighted to sectors such as utilities, staples and healthcare, and less so to, for example, tech, financials and industrials versus our previous allocation. But, again — while this mix will likely under-perform the old mix as long as the bull market continues to rage — it’s not what I’d call a bear market portfolio; i.e., it’s more like an all-weather portfolio, with a defensive tilt. 


For example, as I type this morning the Dow is up 38 points (+0.14%), while the S&P 500 is up 0.30%. Meanwhile our core mix is ever-so-slightly in the green overall (+0.10%), with 11 positions up, 11 down and 2 dead even.


Nick and I were chatting this morning about the present market, and macro, setup: We discussed several indicators that are, frankly, resoundingly bubbly. Things like index concentration in strikingly few names (record levels in fact), like the utter complacently showing up in places like overall short ratios, put/call ratios, futures traders positioning, individual investor and investment adviser sentiment. Like Tesla, like the record high price/sales ratio for the S&P 500, the record market cap to GDP ratio, and so on. There’s more, but the granddaddy of all is the insane ignorance of history on display in what is now the most bubbly corporate bond market ever. The latter is what’ll likely make the next bear market yet another one for the record books.


But the thing is, and we acknowledged this in our chat, bubbles can expand for a very long period of time. Particularly when you have virtually every central banker on the planet — contrary to their calming rhetoric — seeing what we’re seeing and acting, or bracing to act, in every conceivable way to kick the can as far down the road as possible. Of course the problem is that can-kicking is tantamount to bubble-inflating. In fact, and I bear no malice toward central bankers (they’re just doing what they’re paid to do), it’s their incredibly low tolerance for pain that foments the money printing and interest rate suppression that essentially explains how we got here in the first place.


We concluded our morning macro session with me saying; “bottom line, while stocks absolutely could melt higher for a long time from here, I’m simply not willing to see our clients take the brunt of what is likely to be another hellacious bear market, when it gets here. We’ll just have to continue to communicate (explain and illustrate current conditions) why we’re taking somewhat of a backseat — (i.e., dialing back the risk, and, thus, the potential for monster gains from here) — amid this melt-up.”


Thanks for reading!
Marty