One of the more common questions I get is “how should a conservative investor allocate assets these days”. Well, don’t ask me. Ask someone who’s been pretty bearish and generally conservative for a while now – Gary Shilling. Some of these ideas are a bit aggressive for my taste, but I thought I’d pass them along as the whole portfolio might give you some ideas on positioning:
“Long Treasury bonds, but modestly. They’ve been beaten up, maybe too much so. Also, they serve as an anchor against a sudden Grand Disconnect-closing shock.
Long Japanese stocks and short the yen, opposite sides of the same bet that Prime Minister Abe will persist in using a weak yen to promote economic growth and inflation in Japan. We’re also assuming that his efforts to stimulate fiscallyas well as monetarily and to promote structural reform will make headway. This trade worked wonderfully from last fall through May, was set back in June but now may be back on track.
Long dividend-heavy stocks such as utilities, consumer staples and healthcare to participate in rising U.S. stocks, but defensively with the cushion of meaningful dividends.
Short commodities in view of continuing declines in commodity prices as well as the slide in Chinese growth and the quenching of her thirst for commodity imports.
Short commodity-exporter currencies, especially the Australian dollar due to the vulnerability of that country’s exports to flagging growth in China.
Short emerging market stocks and bonds. Those economies are export-led, and with the ongoing recession in Europe and slow U.S. growth, global export demand is weak.”
Source: Gary Shilling’s Insights Newsletter
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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