Not yet. Risk off. First day in nearly two months... that made us even wonder. So many questions. What if employment does not accelerate as expected. What if inflation is structural, transitory, or perhaps over and done with, sort of? What if the Delta variant of SARS-CoV-2 virus, or the variant after that... the one that gets past even the best in class (my opinion) messenger RNA vaccines manufactured by Pfizer (PFE) and Moderna (MRNA) ? Think the recovery is sluggish now. How about during another significant wave of infection as summer melts into Autumn? I'm not done.
It's been difficult enough, not to mention expensive, getting safe and effective vaccines to areas of the world in great need. It's been just as hard to get the most frightened citizens among us to even get vaccinated in areas where there has been ample supply. Hence, this virus escapes again only to mutate further. Still. There is more.
China cracks down on enterprise. Both on Chinese companies operating anywhere, and companies from anywhere operating in China. Their crime? Data collection. Data means knowledge. Knowledge is power. The Chinese Communist party does not share power, hence it looks to isolate and deplete any data and knowledge that lies within (or beyond) the party's sphere of influence.
That sphere of influence does not include Taiwan, though Beijing will not recognize Taipei as independent. Hence, geopolitical risk has increased. That president is unsure of this president's response should somebody shoot someone else over the Strait of Taiwan. That president appears to be pressing the point on this issue in order to find out before one shot becomes ten thousand. We really need to announce a permanent U.S. garrison on the isle of Taiwan, and do so yesterday.
Then there is the realm of two best pals that go together better than peanut butter and jelly. Cyber-crime and cryptocurrencies. One has been able to expand thanks to the other. The latter has seen valuations attain rather absurd levels -- for a non-productive asset class that serves no legitimate purpose -- thanks to the activity of the former. Cryptocurrencies are a lot like communism. It sounds great, so liberating... until you realize that it's all about power and the ranks of the key players are rife with despots and their kind.
At some point early in the pandemic, someone thinking themselves clever came up with the term "barbell portfolio" meaning to expose oneself from an equity perspective to both the re-opening (economic growth) trade and the lockdown (sales growth) trade. For close to a thousand years before that, we used to call it diversification and it was a lot broader than simply loading weight onto both ends of a barbell.
The idea, in my own opinion because I trade/invest for myself and then talk and write about it... is to diversify not just across the equity space, but across all asset classes. That means I (you?) want exposure to a well-diversified book of equities, that are then weighted and often reweighted according to market trend, as well as debt securities, commodities and cash. Yes, in this example, it is fine to include cryptos as a minor portion of such a broad investment outlook. The only catch here would be that my view also includes an always adjusted cash balance, and this balance must be in some kind of national fiat currency -- though I loathe fiat. My point is that any cryptocurrency holdings must be held as commodities. I feel the same way about precious metals. Why, because cryptos and gold are not always immediately liquid at face value. Fall asleep for half an hour on some days, and those values may have moved quite a bit. Cash is always worth face value.
You in the back. Question? Real Estate? I am speaking on investable funds here, so if you live there, then no, the real estate holding is outside of the portfolio. Now if one trades (flips) real estate or holds as an investment without living there, then yes.
I like to walk the walk. One thing that just turns my stomach are the parade of jokers we see on financial television these days that not only have no skin in the game, have never had any skin in the game, at least not their own. Remember, a real trader/investor says "I bought" or "I sold." A joker says "We like" or "We prefer." A trader knows what he or she has been in. A joker uses sector terms exclusively without adding any specific names. No hard corporate names. Never.
Some say that they are not permitted to mention corporate names by their firms. To that, I say, then I already know that what you say has been scrubbed by not only your superiors, but also by your legal department. Hence, I basically mute the TV when anyone representing a large broker-dealer/investment bank speaks because I know they have just memorized a speech after sending the interviewer the questions that they are "allowed" to answer.
This I know. I used to work for several of the big shops before I trusted myself enough to go off on my own. I am trying to sell you nothing. I write because I like to, and I usually do have an opinion. I appear on television because it makes my Mom proud. No other reasons. No offense to anyone, but who wants the headaches that come from dealing with customers, legal and otherwise, when you can cut it on your own?
Again, I speak of my book, not yours. I always anticipate volatility. That prevents me from overreacting on bad days. Yes, I have bad days. Discipline as always remains key. Know your target price, pivot point and panic point for every single position. That's discipline.
I think I want exposure to tech permanently. That includes the semiconductors, such as Nvidia (NVDA) , Advanced Micro Devices (AMD) , and yes, I am still long Micron (MU) , Marvell Technology (MRVL) and Taiwan Semiconductor (TSM) . Exposure to software is just as important. I remain long ServiceNow (NOW) which has been a home run, and Salesforce (CRM) , which has been a solid triple. As you can see, I tend to invest in good CEOs, which is important too.
Now, if I name my whole book, we'll be here all day. I still have exposure to the banks, to utilities, to delivery services. Entertainment, to some industrials, and to my one airline that has not performed well, but I believe. In Southwest (LUV) . Why, because they are domestic and I think that will matter for a while.
Now, I just went through all of my portfolios. I used to recommend asset allocation ideas. I did so for years. I am not going to do that right now, but I am going to tell you precisely how I am set up -- outside of real estate. Currently I am 48% in equities, which is below my norm. I am at 32% fixed income, which is almost twice what I used to recommend. I am 10% cash, which is low for me, and I am 10% alternative investments which is almost entirely in gold with some silver. As for cryptos... I have obviously invested in the miners, but hold the tokens only in funds that I do not run myself.
Oh, that's another kind of diversification that I need to mention. Portfolio manager diversification. I think it is dangerous to run all of one's money, or allow someone else to run all of one's money. You need a diversity in thought, as well as a diversity in approach. I use two other traders. Now, in all honesty, I usually do come in first place for the year among the three of us, but there have been years where I was sure glad I had them.
It's all a part of multi-decade survival. Remember, General George Gordon Meade called a council of war at Gettysburg and asked even his junior officers for their opinion. Robert E. Lee only had Longstreet and he ignored Longstreet's wise advice. Nuff said.